Oil falls by around 6% as China’s COVID shutdown weighs

A sticker shows crude oil on the side of a Permian Basin storage tank in Mentone, Loving County, Texas, USA November 22, 2019. Photo taken November 22, 2019. REUTERS / Angus Mordant

NEW YORK, May 9 (Reuters) – Oil prices fell around 6% on Monday along with equities, as continued coronavirus shutdown in China, the largest oil importer, raised concerns about the demand outlook.

Brent oil fell $ 6.45, or 5.7%, to settle at $ 105.94 a barrel. US West Texas Intermediate fell $ 6.68, or 6.1%, to $ 103.09 a barrel. Both contracts have increased by around 35% so far this year.

Global financial markets have been intimidated by concerns about interest rate hikes and recession concerns as tighter and broader covid-19 shutdowns in China led to lower export growth in the world’s No. 2 economy in April. read more

“The Covid locks in China are having a negative impact on the oil market, which is selling out along with stocks,” said Andrew Lipow, president of the Lipow Oil Associated in Houston.

Crude oil imports from China in the first four months of 2022 fell 4.8% from a year ago, but imports in April increased by almost 7%. read more

China’s Iranian oil imports in April came from peak volumes seen in late 2021 and early 2022, when demand from independent refineries weakened after covid shutdowns cut fuel margins and rising imports of lower-priced Russian oil. read more

Wall Street stock indices fell and the dollar peaked in two decades, making oil more expensive for holders of other currencies.

Saudi Arabia, the world’s largest oil exporter, lowered crude oil prices for Asia and Europe in June. read more

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

EU RUSSIA OIL EMBARGO

Last week, the European Commission proposed a step-by-step embargo on Russian oil, which increases Brent and WTI prices for the second week in a row. The proposal needs a unanimous vote by EU members this week to be adopted.

The European Commission is considering offering landlocked Eastern European states more money to upgrade their oil infrastructure in an attempt to convince them to agree, an EU source told Reuters. read more

“The EU oil embargo will trigger a seismic shift in the European and global crude oil markets, which Rystad Energy expects to see as much as 3.0 million barrels per day of EU crude oil imports from Russia cut by December 2022 in a full implementation of the policy,” says Bjørnar Tonhaugen , head of oil market research at Rystad Energi.

German officials are quietly preparing for any sudden halt to Russian gas supplies with an emergency package that could include taking control of critical firms, three people familiar with the matter told Reuters. read more

Japan, a top five importer of crude oil, will ban Russian crude oil imports “in principle,” said Prime Minister Fumio Kishida, adding that this would take time. read more

Reporting by Stephanie Kelly; additional reporting from Shadia Nasralla and Florence Tan; editing by David Evans, David Gregorio and Marguerita Choy

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