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.



Oil Edges Up on Strong US GDP Data

A pumpjack brings oil to the surface in the Monterey Shale, California, US April 29, 2013. REUTERS/Lucy Nicholson/File Photo
A pumpjack brings oil to the surface in the Monterey Shale, California, US April 29, 2013. REUTERS/Lucy Nicholson/File Photo
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Oil Edges Up on Strong US GDP Data

A pumpjack brings oil to the surface in the Monterey Shale, California, US April 29, 2013. REUTERS/Lucy Nicholson/File Photo
A pumpjack brings oil to the surface in the Monterey Shale, California, US April 29, 2013. REUTERS/Lucy Nicholson/File Photo

Oil prices were up slightly on Friday on stronger-than-expected US economic data that raised investor expectations for increasing crude oil demand from the world's largest energy consumer.

But concerns about soft economic conditions in Asia's biggest economies, China and Japan, capped gains.

Brent crude futures for September rose 7 cents to $82.44 a barrel by 0014 GMT. US West Texas Intermediate crude for September increased 4 cents to $78.32 per barrel, Reuters reported.

In the second quarter, the US economy grew at a faster-than-expected annualised rate of 2.8% as consumers spent more and businesses increased investments, Commerce Department data showed. Economists polled by Reuters had predicted US gross domestic product would grow by 2.0% over the period.

At the same time, inflation pressures eased, which kept intact expectations that the Federal Reserve would move forward with a September interest rate cut. Lower interest rates tend to boost economic activity, which can spur oil demand.

Still, continued signs of trouble in parts of Asia limited oil price gains.

Core consumer prices in Japan's capital were up 2.2% in July from a year earlier, data showed on Friday, raising market expectations of an interest rate hike in the near term.

But an index that strips away energy costs, seen as a better gauge of underlying price trends, rose at the slowest annual pace in nearly two years, suggesting that price hikes are moderating due to soft consumption.

China, the world's biggest crude importer, surprised markets for a second time this week by conducting an unscheduled lending operation on Thursday at steeply lower rates, suggesting authorities are trying to provide heavier monetary stimulus to prop up the economy.