Crude Oil Is Holding Its Breath As China Fears COVID Again / Commodities / Crude Oil
While China plans to implementlockdowns for fear of an epidemic, concerns about the coronavirus are taking atoll on the oil market. Will it escalate?
Crude oil prices remained lower onTuesday, after significant losses suffered the day before. They are stillweighed down by fears of a general lockdown in Beijing, the capital of China,as well as in Shanghai, thus risking a demand reduction for black gold.
The concern also affects industrialmetals, of which China is a major consumer. They recorded substantial pricedrops on the London Metal Exchange (LME) on Monday. As per the below chart, theLMEX, an index that incorporates the prices of aluminium, copper, lead, nickel,tin, and zinc traded on the LME, posted 4,864.9 points on Monday, erasing allits gains from March and April:
London Metal Exchange (LMEX), TradingEconomics.com
The implementation of China’s zero-COVIDpolicy seems to be heavily affecting Chinese demand for crude, which is alreadydown 1.2 million barrels per day due to the severe health restrictions (strictlockdowns) put in place in Shanghai. According to Bloomberg, Chinese demand forcertain types of fuel (gasoline, diesel, and kerosene for aviation) has alreadyfallen by 20% in April 2022 compared to a year earlier.
In addition, the rise of the US dollarrepresents another factor currently weighing on crude oil prices, since thegreenback is at its 25-month high against the euro.
Dollar Currency Index (DXY),daily chart TradingView.com
On the West Texas Intermediate (WTI)benchmark, we have switched to the new calendar month, which is the Junematurity contract, CLM2022. On the Brent benchmark, we will look at theBRNM2022.
WTI Crude Oil (CLM22) Futures(June contract, daily chart)
Brent (BRNM22) Futures (Junecontract, daily chart, EOD data)
That’sall folks for today.
Thank you.
Sebastien Bischeri
Oil & Gas Trading Strategist
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