Crude oil steps lower on renewed China COVID curbs

On Tuesday, crude prices skidded amid the fresh COVID-19 curbs in China, the world’s biggest oil importer.

The US West Texas Intermediate futures slipped 1.87% to $102.10 per barrel. Similarly, the international Brent crude decreased 1.84% to $105.14 per barrel.

Last week, speculators also turned more bearish on the main oil benchmarks, whipsawed by competing supply and demand outlooks. Correspondingly, money managers reduced net-long positions in both Brent and WTI to the lowest level since 2020.

Multiple Chinese cities adopted new COVID-19 restrictions, from business halts to lockdowns. This move aims to rein in new infections and control the newly detected BA.5.2.1 subvariant in the country.

In line with this, traders worried about further sluggish demand, driving down crude oil prices. In addition, last Sunday, Shanghai recorded 69 new coronavirus infections, the highest since late May.

Moreover, China will publish a raft of economic data this week. Eventually, analysts look for the impact of the COVID-Zero policy in the numbers.

Meanwhile, despite demand concerns, the crude market is still supported by tight supply. Remarkably, western sanctions on Russia over the war in Ukraine have disrupted trade flows for oil and fuel.

Furthermore, there are other curtailments of energy supply routes from Russia that have traders and utilities on edge.

Biden to push for greater crude production

Meanwhile, US President Joe Biden aims to push for greater oil production for OPEC in his meeting in Saudi Arabia this week. Subsequently, the trip comes as America struggles at home to bring down energy prices. As a result, the crude and gasoline inventories were down last week, while distillate stockpiles likely rose.

However, experts explained that the White House understands Saudi Arabia is unlikely to move unilaterally. In addition, Riyadh and other Gulf nations lack significant spare capacity. At the same time, most OPEC producers already operate at maximum capacity. Market participants also anticipated that Biden would discuss Iranian crude on the trip.