Oil falls on worries about lockdowns in China, release of reserves

Pump jack over an oil well along Interstate 25 near Dacono, Colo, December 22, 2018. (AP)

SULAIMANI (ESTA) — Oil prices slid more than $2 a barrel on Monday, following a second straight weekly decline after world consumers announced plans to release a record volume of crude and oil products from strategic stocks and as China lockdowns continued.

Brent crude was down $2.13 at $100.7 a barrel by 0641 GMT, while U.S. West Texas Intermediate crude lost $2.25 to $96.01.

The market has been watching developments in China, where authorities have kept Shanghai, a city of 26 million people, locked down under its “zero tolerance” policy for COVID-19, according to Reuters. China is the world’s biggest oil importer.

Concerns about China’s growth was the main reason for the fall in oil prices today with Shanghai’s lockdown showing no signs of being lifted and Guangzhou looking to start mass virus testing, Reuters cited Jeffrey Halley, senior market analyst at OANDA, as saying.

“Fears are rising now that if China’s Omicron wave spreads to other cities, its zero-COVID policy will see mass extended lockdowns that negatively impact both industrial output and domestic consumption,” he added.

Member nations of the International Energy Agency (IEA) will release 60 million barrels over the next six months, with the United States matching that amount as part of its 180 million barrel release announced in March.

The moves are aimed at offsetting a shortfall in Russian crude after Moscow was hit with heavy sanctions following its invasion of Ukraine.

“We expect these Strategic Petroleum Reserve (SPR) volumes —about 273 million barrels in total and 1.3 million barrels per day (mbd) over the next six months — to go a long way in the short term toward offsetting the 1 mbd of Russian oil supply we expect to remain permanently offline,” JP Morgan analysts told Reuters.

(Esta Media Network/Reuters)

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