Oil slips on China demand worries while EU weighs Russia oil ban

An oil pumpjack and a tank with the corporate logo of state oil company PDVSA are seen in an oil facility in Lagunillas, Venezuela January 29, 2019. (Reuters)

SULAIMANI (ESTA) — Oil prices slipped on Tuesday in a second day of thin trading in Asia, pulled in opposite directions by China’s COVID-19 lockdowns, which could weigh on fuel demand, and prospects for a supply hit from a possible European oil embargo on Russia.

Brent crude futures fell 65 cents to $106.9 a barrel at 0705 GMT, wiping out gains earlier in the day in trading thinned by holidays in China, Japan and parts of Southeast Asia.

U.S. West Texas Intermediate (WTI) crude futures similarly dropped 62 cents to $104.5 a barrel, after hitting an intraday high of $105.80.

“The positive driver has been the EU embargo and whether that will be announced,” Reuters quoted Commonwealth Bank commodities analyst Vivek Dhar as saying.

“Your negative driver is Chinese COVID lockdowns. They’re both very important thematics.”

Beijing, reporting dozens of new cases daily in an outbreak that has entered its second week, is mass-testing residents to avert a lockdown similar to Shanghai’s over the past month, according to Reuters.

Restaurants in the capital of the world’s top oil importer were closed for dining in, while many other venues were closed and streets were quiet on Tuesday during a five-day Labour Day holiday.

The European Commission is expected to finalize work on Tuesday on a sixth package of European Union (EU) sanctions against Russia over its actions in Ukraine, which would include a ban on buying Russian oil.

The embargo may spare Hungary and Slovakia, both heavily dependent on Russian crude, two EU officials said on Monday.

Tight fuel product supplies are adding to demand for crude, which helped to drive up Brent and WTI by more than 40 cents on Monday after a volatile session.

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