Oil slid more than 1% on Tuesday as concerns about demand due to China’s prolonged COVID lockdown outweighed support from a possible European oil embargo on Russia over its operations in Ukraine.
Oil slid more than 1% on Tuesday as concerns about demand due to China’s prolonged COVID lockdown outweighed support from a possible European oil embargo on Russia over its operations in Ukraine.
Beijing, reporting dozens of new cases daily, has been testing residents extensively to prevent a lockdown similar to Shanghai’s over the past month. Restaurants in the capital were closed for dining, and some apartment blocks were closed.
Brent crude was down $1.41, or 1.3%, at $106.17 a barrel at 1339 GMT. US West Texas Intermediate (WTI) crude fell $1.82, or 1.7%, to $103.35.
“The positive driver has been the EU sanctions and whether that will be announced,” said Vivek Dhar, commodities analyst at Commonwealth Bank.
“Your negative driver is the Chinese COVID lockdown. They are both very important themes.”
Brent rose to $139 in March, the highest since 2008, when Moscow’s invasion of Ukraine heightened supply concerns that were already fueling a rally.
The growing prospect of EU sanctions on Russia gave support. The European Commission is expected to finalize work on Tuesday on the next package of EU sanctions against Russia, which will include a ban on buying Russian oil.
“A potential EU-wide oil embargo could significantly reduce the already dwindling availability of Russian barrels,” said Tamas Varga of oil broker PVM.
Also in focus will be the latest round of US Inventory and Supply reports. On average, five analysts polled by Reuters expected US crude inventories to drop 1.2 million barrels in the week to April 29. [EIA/S]
The American Petroleum Institute industry group released its inventory report at 2030 GMT, followed by government data from the Energy Information Administration on Wednesday.
(Additional reporting by Sonali Paul; Editing by Jan Harvey and Jason Neely)
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