Oil collapses by about 6% as the weight of the lockdowns in China due to the Corona virus

A poster with crude oil written on the side of a storage tank in the Permian Basin in Menton, Loving County, Texas, US on November 22, 2019. Photo taken on November 22, 2019. REUTERS/Angus Mordant

NEW YORK (Reuters) – Oil prices fell nearly 6 percent on Monday, along with stocks as the coronavirus shutdown continued in China, the largest oil importer, exacerbating concerns about the outlook for demand.

Brent crude fell $6.45, or 5.7 percent, to close at $105.94 a barrel. US West Texas Intermediate crude fell $6.68, or 6.1 percent, to close at $103.09 a barrel. Both contracts have gained about 35% so far this year.

Global financial markets were spooked by concerns about rising interest rates and recession fears as the tighter and more widespread COVID-19 lockdown in China slowed export growth in the world’s No. 2 economy in April. Read more

“The Covid shutdowns in China are negatively impacting the oil market, which is being sold in conjunction with stocks,” said Andrew Lipow, president of Lipow Oil Associates in Houston.

China’s imports of crude in the first four months of 2022 fell 4.8% from a year ago, but April imports are up about 7%. Read more

China’s imports of Iranian oil in April came from peak volumes seen in late 2021 and early 2022 as demand from independent refineries weakened after coronavirus shutdowns dented fuel margins and increased imports of low-priced Russian oil. Read more

Wall Street stock indices fell and the dollar hit a two-decade high, making oil more expensive for holders of other currencies.

Saudi Arabia, the world’s largest oil exporter, cut crude prices for Asia and Europe for the month of June. Read more

Russian Deputy Prime Minister Alexander Novak was quoted as saying that in Russia, oil production rose in early May from April and production stabilized, after production fell in April as Western countries imposed sanctions over the Ukraine crisis.

EU Russia Embargo Oil

Last week, the European Commission proposed a phased ban on Russian oil, raising Brent and WTI prices for the second week in a row. The proposal needs a unanimous vote by EU members this week to pass.

An EU source told Reuters that the European Commission is considering providing more money to the landlocked eastern EU countries to modernize oil infrastructure in a bid to persuade them to agree. Read more

“The EU oil embargo will lead to a seismic shift in European and global crude markets, which Rystad Energy expects to see a cut of up to 3.0 million barrels per day (bpd) of EU crude imports from Russia by December. ) 2022. “Implement this policy,” said Bjornar Tonhaugen, head of oil market research at Rystad Energy.

Three people familiar with the matter told Reuters that German officials are quietly preparing for any sudden stop in Russian gas supplies with an emergency package that could include taking control of important companies. Read more

Japanese Prime Minister Fumio Kishida said Japan, the top five crude importers, would ban imports of Russian crude “in principle,” adding that it would take time. Read more

(Reporting by Stephanie Kelly) Additional reporting by Shadia Nasrallah and Florence Tan. Editing by David Evans, David Gregorio and Margarita Choi

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