Crude oil plummets below $100 a barrel as global demand slows

Last week, the International Energy Agency announced that US allies will deploy 60 million barrels from stockpiles, bolstering the 180 million-barrel release announced previously by US President Joe Biden. 

Global oil prices resumed their declines as China’s largest Covid-19 outbreak in two years heightens concerns about demand from the world’s biggest crude importer. Brent crude dropped plummeted $4.22 to below $98.60 a barrel, touching the lowest level since late February. 

Virus cases are rising in Shanghai, with millions under lockdown and no clarity on when restrictions will be lifted. The uptick in cases has disrupted port operations and prompted some refiners to trim crude-processing rates.

Oil has given up most of the gains seen since Russia invaded Ukraine in late February following a tumultuous period of trading. However, there appears to be in recent days diminishing concerns about undersupply and, so far, there’s no sign that Russian crude exports are starting to crumble.

The war has aggravated already rampant inflation and prompted the US and its allies to release strategic crude reserves to cool prices.

The release of strategic government oil reserves should ease some market tightness over the coming months, reducing the need for oil prices to rise to trigger near-term demand destruction," said UBS analyst Giovanni Staunovo.

Bank of America maintained its forecast for Brent crude to average $102 a barrel for 2022-23. Swiss investment bank UBS also lowered its June Brent forecast by $10 to $115 a barrel

Shanghai reported a record of 26,000-plus new coronavirus cases on Sunday and the southern metropolis of Guangzhou is implementing a series of restrictions as China struggles to halt the spread. Oil analysts are continuing to reduce demand forecasts as the outbreak curbs travel.

The lockdowns are “truly changing the calculus of the market that was so worried about the sufficiency of supply out of Russia”, said John Kilduff, co-founder at Again Capital. Combined with the historic release of strategic reserves, “it’s really taken a lot of the supply fears out of the market”, he said. 

Last week, the International Energy Agency announced that US allies will deploy 60 million barrels from stockpiles, bolstering the 180 million-barrel release announced previously by US President Joe Biden. 

Russian crude oil shipments in the seven days to April 8 continued a rebound that began the previous week after consistently falling since its February 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 last month as oil climbed, putting pressure on manufacturers already struggling to operate amid repeated virus outbreaks.