Oil Slides on Worries About Lockdowns in China, Release of Reserves

A man climbing a tree looks over barriers, which have been built to separate buildings from a street, amid the coronavirus disease (COVID-19) pandemic in Shanghai, China March 22, 2022. REUTERS/Aly Song
A man climbing a tree looks over barriers, which have been built to separate buildings from a street, amid the coronavirus disease (COVID-19) pandemic in Shanghai, China March 22, 2022. REUTERS/Aly Song
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Oil Slides on Worries About Lockdowns in China, Release of Reserves

A man climbing a tree looks over barriers, which have been built to separate buildings from a street, amid the coronavirus disease (COVID-19) pandemic in Shanghai, China March 22, 2022. REUTERS/Aly Song
A man climbing a tree looks over barriers, which have been built to separate buildings from a street, amid the coronavirus disease (COVID-19) pandemic in Shanghai, China March 22, 2022. REUTERS/Aly Song

Oil prices slid more than $2 a barrel on Monday, following a second straight weekly decline after world consumers announced plans to release a record volume of crude and oil products from strategic stocks and as China lockdowns continued.

Brent crude was down $2.32, or 2.3%, at $100.46 a barrel by 0427 GMT, while US West Texas Intermediate crude lost $2.37, or 2.4%, to $95.89. Last week, Brent dropped 1.5% while US oil slid 1%. For several weeks, the benchmarks have been at their most volatile since June 2020.

The market has been watching developments in China, where authorities have kept Shanghai, a city of 26 million people, locked down under its "zero tolerance" policy for COVID-19.

China is the world's biggest oil importer.

Concerns about China's growth was the main reason for the fall in oil prices today with Shanghai's lockdown showing no signs of being lifted and Guangzhou looking to start mass virus testing, said Jeffrey Halley, senior market analyst at OANDA.

"Fears are rising now that if China's Omicron wave spreads to other cities, its zero-COVID policy will see mass extended lockdowns that negatively impact both industrial output and domestic consumption," Reuters quoted him as saying.

Member nations of the International Energy Agency (IEA) will release 60 million barrels over the next six months, with the United States matching that amount as part of its 180-million-barrel release announced in March. The moves are aimed at offsetting a shortfall in Russian crude after Moscow was hit with heavy sanctions following its invasion of Ukraine.

"We expect these Strategic Petroleum Reserve (SPR) volumes —about 273 million barrels in total and 1.3 million barrels per day (mbd) over the next six months — to go a long way in the short term toward offsetting the 1 mbd of Russian oil supply we expect to remain permanently offline," said JP Morgan analysts in a note.

However, it is unclear whether that will fully offset the shortfall in Russian oil as exports continued, with India, lured by steep discounts, increasing imports.

On Monday, President Joe Biden will meet virtually with Indian Prime Minister Narendra Modi, the White House said, at a time when the United States has made it clear it does not want to see an uptick in Russian energy imports by India.

In the United States, energy firms last week added oil and natural gas rigs for a third week in a row as Washington seeks more production to help its allies wean themselves off Russian oil and gas.



Rosneft: OPEC+ Decision to Speed Up Output Increase Justified

FILE PHOTO: Chief Executive of the oil producer Rosneft Igor Sechin attends a plenary session of the St. Petersburg International Economic Forum (SPIEF) in Saint Petersburg, Russia, June 20, 2025. REUTERS/Anton Vaganov/File Photo
FILE PHOTO: Chief Executive of the oil producer Rosneft Igor Sechin attends a plenary session of the St. Petersburg International Economic Forum (SPIEF) in Saint Petersburg, Russia, June 20, 2025. REUTERS/Anton Vaganov/File Photo
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Rosneft: OPEC+ Decision to Speed Up Output Increase Justified

FILE PHOTO: Chief Executive of the oil producer Rosneft Igor Sechin attends a plenary session of the St. Petersburg International Economic Forum (SPIEF) in Saint Petersburg, Russia, June 20, 2025. REUTERS/Anton Vaganov/File Photo
FILE PHOTO: Chief Executive of the oil producer Rosneft Igor Sechin attends a plenary session of the St. Petersburg International Economic Forum (SPIEF) in Saint Petersburg, Russia, June 20, 2025. REUTERS/Anton Vaganov/File Photo

Head of Russia's largest oil producer Rosneft Igor Sechin said on Saturday that the decision by the OPEC+ to speed up output increase now looked far-sighted and justified in the light of the confrontation between Israel and Iran.

OPEC+ crude output represents about 41% of global oil production. The group's main objective is to regulate the supply of oil to the global market.

The Organization of the Petroleum Exporting Countries and its allies, led by Russia, in April agreed a bigger-than-expected output hike for May.

OPEC+ has since decided to continue with more than planned hikes.

"The decision taken by OPEC leaders to forcefully increase production looks very far-sighted today and, from the market's point of view, justified, taking into account the interests of consumers in light of the uncertainty regarding the scale of the Iran-Israel conflict," Sechin said.

Besides the 2.2 million bpd cut that the eight members started to unwind in April, OPEC+ has two other layers of cuts that are expected to remain in place until the end of 2026.

Oil prices had initially fallen in response to the OPEC+ decision to increase oil production, but the outbreak of an aerial war between Israel and Iran has so far been the main factor behind their return to around $75 per barrel, levels unseen since the start of the year.

Speaking at the St. Petersburg International Economic Forum, Sechin, a long-standing ally of Russian President Vladimir Putin, also said there will be no oil glut long-term despite the production rise due to low stockpile levels, though rising usage of electric vehicles in China might hit oil demand.

Putin said on Friday he shared OPEC's assessment that demand for oil will remain high. He also said that oil prices had not risen significantly due to the conflict between Iran and Israel, and that there was no need for OPEC+ to intervene in oil markets.