Oil falls 4% to below $100 per barrel on worsening China demand outlook

Oil resumed its decline as China’s virus resurgence worsened, raising concerns about demand from the world’s biggest crude importer.

Brent crude for June delivery was down $3.93, or 3.8 per cent, at $98.85 a barrel by 1130 GMT. US West Texas Intermediate crude lost $4.19, or 4.3 per cent, to $94.07.

Virus cases continue increasing in Shanghai, and there is no clarity on when restrictions will be lifted. The flare-up has led to disruptions at ports and prompted some refiners to trim operating rates.

Oil now has given up most of the gains seen since Russia’s invasion of Ukraine in late February following a tumultuous period of trading. A weakening structure in the futures curve in recent days has pointed to diminishing concerns about undersupply and, so far, there’s no sign that Russia’s crude exports are starting to crumble.

The war has fanned inflation and prompted the US and its allies to release strategic reserves to cool prices.

Shanghai reported a record of 26,000-plus new coronavirus cases Sunday, and the southern metropolis of Guangzhou is implementing a series of restrictions, as China struggles to halt the spread of the highly infectious omicron variant while pursuing its Covid Zero strategy. Oil analysts are continuing to cut their demand forecasts.

“It is above all the bad news from China that is weighing on prices, as the number of Covid cases continues to surge,” said Barbara Lambrecht, an analyst at Commerzbank AG. “The lockdowns that are slowing oil demand in the world’s second-largest consumer country threaten to persist for even longer.”

Russian crude oil shipments in the seven days to April 8 continued a rebound that began the previous week after consistently falling since the nation’s Feb 24 invasion of Ukraine. Weekly shipments hit almost 4 million barrels a day in the first full week of April, the highest level seen so far this year.

Factory gate prices in China rose more than expected.