Oil fell as Chinese efforts to cushion the impact of antivirus lockdowns failed to reassure investors over the outlook for Asia’s top economy. West Texas Intermediate sagged below $109 a barrel after ending little changed on Monday.
The drop came even as China rolled out a broad package of measures to support businesses and aid demand, including policies to help people buy cars and ensure cargo transport runs smoothly. Crude retreated alongside other industrial commodities, including copper and iron ore.
As China’s curbs drag on, banks are pruning forecasts for growth in the largest oil importer. UBS Group AG cut its gross domestic product projection to 3 per cent, from 4.2 per cent, while JPMorgan Chase & Co. downgraded to 3.7 per cent, from 4.3 per cent.
US benchmark oil has traded in a narrow range around $110 a barrel over the past two weeks as investors weigh the fallout from the war in Ukraine, including Hungary’s opposition to a European Union (EU) ban on Russian crude, and the outlook for growth.
While US oil consumption is expected to pick up further over a busy summer-driving season, energy usage in China has been crimped by the harsh lockdowns imposed in key cities to combat coronavirus outbreaks.
A high level of uncertainty remains over demand from China, according to Daniel Hynes, a senior commodities strategist at Australia & New Zealand Banking Group. In addition, the stalled EU ban suggests “a move towards the thinking that we won’t see sanctions happen in the short term”, he said.