Oil falls as China’s worsening virus flare-up risks demand

Bloomberg

Oil retreated as China’s worsening virus resurgence raised concerns about demand in the world’s biggest crude importer.
West Texas Intermediate futures fall as much as 6.2% after authorities in Shanghai said they will lock down half of the city in turns for mass Covid-19 testing. Global growth risks from inflation and tightening monetary policy also hit market sentiments, earlier pushing sovereign bonds lower.
Russia’s invasion of Ukraine continues to disrupt supplies of key commodities — oil is heading for a fourth month of gains despite starting lower this week — and that is stoking inflation. Russian oil supply is getting squeezed as many western buyers shun purchases. The country’s exports from March 17-23 fell by more than a quarter from the previous week, according to industry data.
However, some crude is finding its way into Asia. East-bound exports of a few grades from Baltic and Black Sea ports rises to the highest in almost two years during the first 23 days of March, according to Vortexa Ltd. data. Moscow is still able to sell its crude due to price discounts and aims to keep output steady even amid unprecedented sanctions, Deputy Prime Minister Alexander Novak said last week.
Oil’s rally over the past month has been led by concerns over Russian supply, but demand worries are now starting to emerge with the spread of the virus in China. Shanghai — a city of 25 million people — will first lock down areas east of the Huangpu River, which includes its financial district and industrial parks, for four days. Then the restrictions will shift to the city’s west for another four days, according to a statement from the local government.
“There is a similar concern that we’ve seen in the past about demand destruction due to mobility restrictions,” said Giovanni Staunovo, a commodity analyst at UBS Group AG’s global wealth management unit.
A temporary pause in hostilities by Yemen’s Houthis against Saudi Arabia was also contributing to lower oil prices on Monday, Staunovo said.
Oil demand in China is suffering from a fresh bout of high-profile virus clampdowns, with a staggered, eight-day lockdown spanning its top financial hub weighing on consumption in the world’s top importer.
Meanwhile, BP plans to take the hydrocracker offline at its Lingen refinery in Germany around the end of April, according to a person familiar with the matter.