Oil posts weekly loss as China lockdowns amplify demand fears
BNN Bloomberg
Oil dropped for the third week out of the last four with China facing a large consumption hit and the Federal Reserve signaling that it will aggressively tighten monetary policy to curb inflation.
Oil dropped for the third week out of the last four with China facing a large consumption hit and the Federal Reserve signaling that it will aggressively tighten monetary policy to curb inflation.
West Texas Intermediate fell over US$4 this week, settling near US$102 a barrel after a volatile trading week. Fuel consumption in China, the world’s biggest crude importer, is expected to drop 20 per cent in April from a year ago, according to people with inside knowledge of the country’s energy industry.
The country has imposed a series of lockdowns, including in Shanghai to stamp out a fresh COVID-19 wave. The drop in fuel demand is the equivalent to a decline of 1.2 million barrels a day, the people said.
“Shrinking demand is a direct result of the impact of lower economic activity globally,” said Claudio Galimberti, Rystad Energy’s senior vice president of analysis. This year, “oil demand is set to shed 1.4 million barrels per day, dropping below the highs set in 2019.”
The macroeconomic picture is also creating headwinds for crude. Investors are bracing for the U.S. central bank to hike interest rates at a rapid clip, with Chair Jerome Powell signaling two or more half percentage-point increases in comments on Thursday. The pivot has boosted the dollar, making commodities more expensive for holders of other currencies.
