Crude losses in wake of new coronavirus measures in China

Oil prices fell further on Monday, continuing last week’s downward slide as tight new restrictions imposed by China to tackle the coronavirus pandemic reignited fears of a slowdown in demand.

Beijing imposed strict new restrictions on several cities over the weekend to deal with the emergence of Omicron’s highly contagious BA.5 sub-variant in the country.

This development has had an immediate impact on crude prices, as China is the world’s largest oil importer and the pandemic restrictions are expected to reduce the country’s demand for oil, putting a brake on otherwise rising oil prices. of crude since the beginning of the year.

At the same time, of course, analysts estimate that the limited supply of oil is likely to act as a buffer to a sharp drop in the price. Inventories at the Cushing, Oklahoma, US delivery hub remain “at risk of slipping below the 20 million barrel level for the first time since October 2014,” notes Robert Yawger, executive director of energy futures at Mizuho Securities, in its note.

These estimates helped limit pressure on crude oil futures.

Thus, the August West Texas Intermediate crude contract closed on Monday 70 cents, or 0.7% lower, at $104.09 a barrel.

In contrast, Brent crude managed to erase intra-session losses and close up 8 cents, or almost 0.1%, at $107.10 a barrel.

At the same time, of course, investors have their eyes on the upcoming meeting between US President Joe Biden and the Crown Prince of Saudi Arabia, Mohammed bin Salman, for the first time since the breakdown of relations between the two states on the occasion of his assassination journalist Jamal Khashoggi in 2018, for which Biden had strongly accused the Saudi leader.

The Biden visit is aimed at getting Saudi Arabia to further increase production in order to ease market supply problems, which have greatly intensified since Western sanctions on Russia’s oil as a result of Moscow’s invasion of Ukraine.