Calendar An icon of a desk calendar. Cancel An icon of a circle with a diagonal line across. Caret An icon of a block arrow pointing to the right. Email An icon of a paper envelope. Facebook An icon of the Facebook "f" mark. Google An icon of the Google "G" mark. Linked In An icon of the Linked In "in" mark. Logout An icon representing logout. Profile An icon that resembles human head and shoulders. Telephone An icon of a traditional telephone receiver. Tick An icon of a tick mark. Is Public An icon of a human eye and eyelashes. Is Not Public An icon of a human eye and eyelashes with a diagonal line through it. Pause Icon A two-lined pause icon for stopping interactions. Quote Mark A opening quote mark. Quote Mark A closing quote mark. Arrow An icon of an arrow. Folder An icon of a paper folder. Breaking An icon of an exclamation mark on a circular background. Camera An icon of a digital camera. Caret An icon of a caret arrow. Clock An icon of a clock face. Close An icon of the an X shape. Close Icon An icon used to represent where to interact to collapse or dismiss a component Comment An icon of a speech bubble. Comments An icon of a speech bubble, denoting user comments. Ellipsis An icon of 3 horizontal dots. Envelope An icon of a paper envelope. Facebook An icon of a facebook f logo. Camera An icon of a digital camera. Home An icon of a house. Instagram An icon of the Instagram logo. LinkedIn An icon of the LinkedIn logo. Magnifying Glass An icon of a magnifying glass. Search Icon A magnifying glass icon that is used to represent the function of searching. Menu An icon of 3 horizontal lines. Hamburger Menu Icon An icon used to represent a collapsed menu. Next An icon of an arrow pointing to the right. Notice An explanation mark centred inside a circle. Previous An icon of an arrow pointing to the left. Rating An icon of a star. Tag An icon of a tag. Twitter An icon of the Twitter logo. Video Camera An icon of a video camera shape. Speech Bubble Icon A icon displaying a speech bubble WhatsApp An icon of the WhatsApp logo. Information An icon of an information logo. Plus A mathematical 'plus' symbol. Duration An icon indicating Time. Success Tick An icon of a green tick. Success Tick Timeout An icon of a greyed out success tick. Loading Spinner An icon of a loading spinner.

Oil suffers weekly loss as China lockdowns, Fed pivot take toll

© BloombergCrude oil pipelines stand at the U.S. Department of Energy's Bryan Mound Strategic Petroleum Reserve in Freeport, Texas, U.S.
Crude oil pipelines stand at the U.S. Department of Energy's Bryan Mound Strategic Petroleum Reserve in Freeport, Texas, U.S.

Oil headed for its third weekly loss in four as lockdowns in virus-hit China dragged on and the Federal Reserve signaled that monetary policy will be tightened aggressively to contain decades-high inflation.

West Texas Intermediate fell below $103 a barrel, and is about 4% lower this week. The world’s biggest crude importer has imposed a series of lockdowns including in Shanghai to stamp out a fresh Covid-19 wave. The curbs have cut demand for fuels and spurred economists to reduce growth forecasts.

Investors are bracing for the US central bank to hike interest rates at a rapid clip, with Chair Jerome Powell signaling two or more half percentage-point increases in comments on Thursday. The pivot has boosted the dollar, making commodities more expensive for holders of other currencies.

Oil remains more than 35% higher this year despite the recent weakness as the fallout from Moscow’s invasion of Ukraine continues to rattle markets and roil crude flows. There are calls for the European Union to ban Russian oil, matching steps taken by the US and UK. Support for prices has also come from interruptions to supplies from Libya amid a wave of protests.

“It’s a choppy market,” said Gao Mingyu, chief energy analyst at SDIC Essence Futures Co. “China’s virus measures curb on diesel and gasoline demand hasn’t been effectively lifted, weakening both futures and the spot market.”

Shanghai, China’s main commercial hub, vowed to step up the enforcement of lockdown measures, disappointing expectations that its outbreak had peaked. Reflecting the drag caused by the disruption, economists polled by Bloomberg lowered their growth forecasts for the country once again.

Prices

  • WTI for June delivery dropped 0.9% to $102.89 a barrel on the New York Mercantile Exchange at 6:10 a.m. in London.
  • Brent for June settlement fell 0.9% to $107.41 a barrel on the ICE Futures Europe exchange.

As part of a strategy to contain inflation, US President Joe Biden and allies have ordered major releases of crude from national stockpiles. Twelve companies were awarded all of the 30 million barrels offered from the Strategic Petroleum Reserve in the second sale, the US Energy Department said Thursday. In Asia, Japan announced an auction on Friday.

Despite the SPR sales, Morgan Stanley raised its forecasts for Brent crude by $10 for both the third and fourth quarters. The bank said that it saw market balances as “tighter than before,” with a deficit of about 1 million barrels a day persisting throughout the year, according to an April 21 note.

“Risks to prices are skewed to the upside,” the bank said. “We see a high risk that the EU will enact an import embargo for Russian crude, although it would probably be implemented with a lengthy grace period of four-to-five months.”

Oil markets remain in a bullish, backwardated pattern with near-term prices above longer-dated ones, but differentials have narrowed considerably since early March. Brent’s prompt spread – the gap between its two nearest contracts – was 39 cents a barrel on Friday, down from $3.77 on March 4.

Recommended for you

More from Energy Voice

Latest Posts