Brent futures fell $4.33 or 4.1%, while US West Texas Intermediate (WTI) crude fell 3.5%.
Oil fell nearly 4% on Monday to its lowest in two weeks on rising concerns about the global energy demand outlook due to a prolonged COVID-19 lockdown in Shanghai and a possible rise in US interest rates.
“The prospect of slower economic growth this year amid a hike in US interest rates … has already dampened oil-demand forecasts,” analysts at Eurasia Group Consultancy said. As the lockdown continues, the higher the risk of demand escalation, the more vulnerable it is.”
Shanghai’s COVID-19 lockdown misery dragged on for a fourth week, as a massive testing order in Beijing’s largest district raised fears that the Chinese capital could be destined for a similar fate.
China is the world’s largest oil importer.
Brent futures fell $4.33 or 4.1% to $102.32 a barrel, while US West Texas Intermediate (WTI) crude fell $3.53, or 3.5%, to $98.54.
Both the benchmarks closed at their lowest levels since April 11, after falling nearly 5% last week. Since reaching its highest level since 2008 in early March, the price is down about 25%.
That return prompted US speculators last week to cut their net long futures and options positions to their lowest since April 2020.
Open interest in WTI futures on the New York Mercantile Exchange last week hit its lowest level since July 2016, while daily futures volume fell to its lowest level this year.
Besides, putting pressure on oil, the US dollar rose to a two-year high against a basket of other currencies on prospects of a hike in interest rates. A stronger dollar makes oil more expensive for holders of other currencies. [USD/]
Oil was supported at the start of the year by tight supplies following Russia’s February 24 invasion of Ukraine, forcing customers to avoid Russian oil due to Western sanctions. Markets could tighten further if the European Union (EU) imposes sanctions on Russian crude.
The European Union is preparing “smart sanctions” against Russian oil imports, according to a report in The Times of London, citing European Commission Executive Vice President Valdis Dombrowski.
“While the EU Commission is working on a sixth package of sanctions against Russia, a ban on oil exports from Russia is unlikely for now,” said Nicoline Bromander, senior analyst at Rystad Energy.
US gasoline futures, meanwhile, slid lower than crude, pushing the gasoline crackdown – a measure of refining profit margins – to their highest level since hitting a record in April 2020 when WTI settled in negative territory .
Russia’s NK Rosneft failed to sell oil in a jumbo tender after PAO demanded prepayment in rubles, meaning the country’s top oil company will have to find ways to extract more crude to Asian buyers through private deals.
In the United States, which will soon reopen its embassy in Ukraine, officials said domestic oil and gas production is on the rise and will continue to rise to create between 1 million and 1.5 million barrels of oil per day that can be taken off the market. Has been given. After Russia’s invasion of Ukraine.
France’s TotalEnergies SE has temporarily hired a tanker to load Abu Dhabi crude for Europe in early May, the first such shipment in two years.
(Additional reporting by Yuka Obayashi in Tokyo and Alex Lawler in London; Editing by Marguerita Choy, David Gregorio and Chizu Nomiyama)
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