Oil Ends Down 7% on China Covid Scare

© RIA Novosti . Grigoriy Sysoev / Go to the photo bankРабота нового офиса фондовой биржи РТС
Работа нового офиса фондовой биржи РТС - Sputnik International, 1920, 28.03.2022
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NEW YORK (Sputnik) - Oil prices tumbled 7 percent after China’s lockdown of its Shanghai financial hub over a Covid scare, and the market fell further in after-hours trade.
London-traded Brent, the global oil benchmark, settled the official session down $8.17, or 6.8%, at $112.48 per barrel on Monday. It fell to as low as $108.53 during the regular session. In post-settlement trade, Brent fell almost $11 to trade at under $107 by 3:45 PM ET (19:45 GMT).
New York-traded US crude benchmark West Texas Intermediate, or WTI, settled down $7.94, or 7%, at $105.96. WTI hit a low of $104.52 during the regular session. In post-settlement trade, the US crude benchmark lost more than $11, trading at under $103.
Oil prices tumbled earlier in the day after number two oil consumer China locked down Shanghai in two stages to carry out testing over an eight-day period, following a new daily record for asymptomatic Omicron infections.
It was the biggest Covid-related disruption to hit Shanghai, and sent prices of copper tumbling as well on fears that any further curbs could hurt demand in China, which is also the world's second-largest economy. As late as Saturday, Shanghai's authorities denied there would be a lockdown as the city pursued a more piecemeal "slicing and gridding" approach to try and rein in its Omicron breakout.
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The energy minister of the United Arab Emirates Suhail Mohamed Al-Mazrouei, however, limited the market’s downside by allaying concerns that OPEC+ might be tempted to overcompensate the present crude shortage by raising production beyond its standard monthly increment of 400,000 barrels per day.
Without digging into OPEC+ capacity - and notwithstanding the politics of the moment - Mazroui tried suggesting that Europe should reconsider its plan to ditch Russian energy imports.
Germany’s Chancellor Olaf Scholz said earlier in the day that Europe’s largest economy might proceed this year itself with its cut off from Russian coal and oil, despite its heavy reliance on these.
"Russia is an important member (of OPEC+) and leaving the politics aside, this volume is needed today," Mazroui said in an interview with Asharq Business. "Unless someone is willing to bring 10 million barrels a day to the table we don't see how one can substitute Russia."
The UAE energy minister also tried to appease some of the dismay of the consuming countries by stating that OPEC+ is "not happy with higher crude prices". But Mazroui also said the alliance "can't oversupply the market", adding that raising production could only be done in a measured and consensual manner among OPEC+ members."
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