(Bloomberg) – Oil fell again after its biggest weekly loss since August as China tightened anti-Covid curbs, hurting the demand outlook.
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The global benchmark Brent oil price fell to $87 a barrel after falling nearly 9% last week. The country saw its first Covid-19-related death in nearly six months on Saturday and two more were reported on Sunday, raising fears of a further wave of restrictions in the country. the world’s largest oil importer, just as a city of 11 million people near the capital asked its residents to implement restrictive measures. Stay at home during the pandemic.
Goldman Sachs Group Inc. lowered its fourth-quarter forecast for Brent crude by $10/bbl to $100, according to a note, with the drop partly due to the possibility of China adopting additional anti-virus measures as cases of the disease. increase.
Crude oil wiped out gains made at the start of the quarter, when the Organization of the Petroleum Exporting Countries and its allies including Russia agreed to reduce output by 2 million bpd. An impending European Union ban on Russian seaborne flows and the Group of 7 price cap plan are clouding the outlook, with officials likely to announce the cap in June. Wednesday as they ramped up their response to Moscow’s invasion of Ukraine.
“The market is right to worry about future fundamentals given the severe Covid cases in China and the lack of clarity on implementation,” said Goldman analysts including Callum Bruce. price term. However, for long-term investors, the drop offers an opportunity to gain more duration, they said.
The market’s weakness is reflected in the rapidly falling spreads. Brent’s quick spread – the gap between the two nearest contracts – is 43 cents a barrel in reverse, down from more than $2 a barrel a month ago. The same gauge for the West Texas Intermediate has entered a buy hold, a bearish signal that suggests ample supply in the near term.
Commodity investors are also concerned that further aggressive monetary tightening will lead to a global recession, affecting energy consumption. Traders this week will look to the minutes of the Federal Reserve’s most recent policy meeting for more clues on the course of rate hikes.
James Whistler, managing director of Vanir Global Markets Pte, said: “With the record high number of Covid cases and slumping movement data in China, it is difficult to find a bullish trend in the market. “The oil market cannot shake the bear.”
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