Oil Extends Losses on China Demand Concerns Ahead of OPEC+ Meet By Bloomberg

(Bloomberg) — Oil kept falling in Asia — after sliding 7% on Monday — on growing concern that a virus resurgence in China will weigh on global demand.

Futures in New York dropped around 2% to near $104 a barrel. China is tackling its worst outbreak since Wuhan more than two years ago at the start of the pandemic. The highly contagious omicron variant is testing the world’s biggest crude importer’s Covid Zero strategy.

The OPEC+ alliance, meanwhile, meets on Thursday to discuss its supply policy for May and the group has signaled it will stick to its existing policy and ratify another modest increase in output.

Oil is still heading for a monthly gain after Russia’s invasion of Ukraine rattled global markets, and the war is raging despite diplomatic efforts for a peace deal. The conflict has fanned inflation, driving up the cost of everything from fuels to food as economies recover from the pandemic.

See also: Tunnels Blocked, Flights Canceled as Curbs Hurt China Oil Demand

Shanghai is the latest Chinese city to be caught up in the outbreak. Rystad Energy estimated a staggered lockdown across the financial center could potentially reduce oil demand by as much as 200,000 barrels a day for the duration of the restrictions. About 62 million people in China are either in lockdown or facing one imminently, according to Bloomberg calculations.

OPEC+ will ratify an increase of 430,000 barrels a day scheduled for May if no alterations are made. With many members struggling to fulfill their planned increases over the past few months and global demand bouncing back from the pandemic, that decision may cause markets to tighten further.

©2022 Bloomberg L.P.