Business Maverick: Oil plunges to lowest since 2021 as China unrest rattles market

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Oil tumbled to the lowest level since December as unrest in China hurt investors’ appetite for risk and the outlook for energy demand, adding to stresses in an already-fragile global crude market.

West Texas intermediate sank below $75 a barrel after three weeks of losses. The dollar rose on demand for havens after protests over harsh anti-virus curbs spread across the largest crude importer over the weekend. Large crowds gathered in Shanghai andOil’s leg lower is the latest twist in what’s been a tumultuous 12 months, with volatility driven by the war in Ukraine, aggressive central bank tightening to combat inflation, and China’s relentless attempts to eradicate Covid-19.

“Sentiment in the oil market remains negative, and developments over the weekend in China will certainly not help,” said Warren Patterson, head of commodities strategy at ING Groep NV in Singapore. “Attention seems fully focused on the demand story.” Aside from China, traders were also assessing a US move to grant supermajor Chevron a licence to resumein Venezuela after sanctions had halted all drilling activities almost three years ago. The sanctions relief comes after Norwegian mediators announced the restart of political talks between President Nicolas Maduro and the opposition this weekend.

Key market metrics are signalling weaker conditions. WTI’s prompt spread – the gap between its nearest two contracts – was 16 cents a barrel in a bearish contango pattern compared with $1.29 a barrel in backwardation a month ago. Since the onset of the pandemic, China’s approach to dealing with Covid-19 has been founded on mass testing and widespread lockdowns to suppress outbreaks, along with vaccinations. That’s hurt energy demand and spurred a buildup of resentment about the restrictions as other nations opened back up. Despite the web of rules, virus cases rose to aIn Europe, EU members can’t yet forge a consensus on how strict the Group of Seven-led price cap on Russian oil should be.

 

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Business Maverick: Commodities sink as Covid’s spread, protests worsen outlook in ChinaCommodities sank as China’s Covid outbreak worsened and a series of stunning street protests in cities across the nation threatened to derail economic activity and sap demand for energy, food and raw materials.
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