Oil was lower in early Asian trading due to the possibility of China’s COVID-19 lockdowns will crimp demand.
Crude oil prices could weaken by another 3%-5% if there seems no end in sight for China’s pandemic lockdowns, said Oanda senior market analyst Edward Moya.
WTI crude oil should find decent support at the mid-$90-per barrel level, but continued US dollar strength could keep commodities vulnerable to further falls, Oanda reported.
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June WTI crude oil futures are 1.3% lower at $97 per barrel, while June Brent crude oil futures were 1.2% lower at $101.53, per barrel. For several weeks, the benchmarks have been at their most volatile since June 2020.
The market has been watching developments in China, where authorities have kept Shanghai, a city of 26 million people, locked down under its “zero tolerance” for COVID-19. China is the world’s biggest oil importer.
Member nations of the International Energy Agency (IEA) will release 60 million barrels over the next six months, with the United States matching that amount as part of its 180 million barrel release announced in March.
The release could also deter producers, including the Organization of the Petroleum Exporting Countries (OPEC) and US shale producers, from accelerating output increases even with prices around $100 a barrel, ANZ Research analysts said in a note.
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However, the OPEC+ group of oil exporting nations has not shown any inclination to increase its output targets more than the 400,000 barrels per day it has been adding monthly as part of a restoration of supply cuts.
The IEA release would amount to roughly two million barrels of daily supply for the next two months – plus another 1 million barrels per day from the United States for four months after that. It is unclear whether that will offset the shortfall in Russian crude after that nation was hit with heavy sanctions following its invasion of Ukraine.
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Russia’s production of oil and gas condensate fell to 10.52 million barrels per day for April 1-6 from a March average of 11.01 million bpd.
– Reuters contributed to this report.