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Futures Movers: U.S. oil prices end below $100 a barrel as China COVID spread triggers fresh demand worries

Oil futures fell sharply on Monday, with the U.S. benchmark ending below $100 a barrel for the lowest finish in two weeks, as worries over spreading COVID cases in China weigh on prospects for energy demand.

That has added to concerns that Federal Reserve tightening could also weaken the outlook for the commodity.

Price action

West Texas Intermediate crude for June delivery 



tumbled 3.5%, or $3.53, to settle at $98.54 a barrel on the New York Mercantile Exchange — their lowest finish since April 11, FactSet data show. Prices posted a decline of about 4.1% last week.

June Brent crude 


fell 4.1%, or $4.33, to $102.32 a barrel on ICE Futures Europe, also the lowest finish in two weeks, after falling 4.5% last week.

May gasoline 

slid 2% to $3.24 a gallon, while May heating oil 

 added 3.9% to end at $4.091 a gallon, the highest in about a month.

May natural gas 

rose 2.1% to $6.669 per million British thermal units, following a 10.5% slump last week.

Market drivers

Oil sold off amid the ongoing lockdowns in Shanghai and other parts of China, “seriously denting petroleum demand there,” said Marshall Steeves, energy markets analyst at S&P Global Commodity Insights. “This really illustrates the supremacy of the demand fears related to China over concerns related to Russian oil exports.”

“ “This really illustrates the supremacy of the demand fears related to China over concerns related to Russian oil exports.” ”

— Marshall Steeves, S&P Global Commodity Insights

Also, oil demand growth around the globe could be crimped by slowing economic growth as the Fed and other central banks tighten monetary policy in an effort to slow inflation, Steeves told MarketWatch.

China growth worries added to an overall risk-averse mood across global markets on Monday that washed over commodity prices. Iron ore and steel futures slumped in Asia over fears that Beijing could face hash COVID restrictions, echoing what has been seen in Shanghai, where weeks of lockdowns have affected millions.

Beijing started to test millions of residents and shutting down business districts and some residential areas amid a spike in COVID cases. That led to long lines at supermarkets amid fears a repeat of restrictions seen in Shanghai, with millions now locked down for weeks.

Oil prices also saw pressure from strength in the U.S. dollar Monday, as did many commodities such as gold.

Meanwhile, Jeffrey Halley, senior market analyst at OANDA, said in a note to clients that he’s sensing a shift in sentiment for oil, even amid tight supplies, because Asian markets ignored a couple of key headlines on Monday.

Firstly, Valdis Dombrovskis, the European Commission’s executive vice president, told The London Times, that the EU was preparing “smart sanctions” on Russian energy imports, which would include “some form” of an oil embargo.

Given that many European countries are dependent on Russian oil and gas, a ban on those commodities is not supported by all, with Germany and Hungary among those opposed. But Halley said he has “reservations that any European energy sanctions on Russian oil and natural gas can be ignored for long.”

Analyst: Libya oil production outage a ‘convenient coincidence’ that helps Russia: analyst

As well, the market has dismissed heavy damage to a major Libyan oil terminal during recent clashes, Halley said.

“Preliminary assessments indicate that 29 sites, including oil derivatives tanks and several other tanks, have been damaged,” Libya’s state-owned National Oil Corp. said in a statement late Saturday.

Elsewhere on Nymex, natural-gas prices got a boost amid growing exports to Europe and with a cold snap forecasted for much of the U.S., particularly in the Northeast, said Nikoline Bromander, senior analyst at Rystad Energy, in a note.

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