Oil Tumbles on Shanghai Lockdown; Germany, OPEC Limit Loss By

© Reuters.

By Barani Krishnan

-- Crude prices tumbled on Monday on China’s unexpected lockdown of its Shanghai financial hub over a Covid scare, before pulling back from the lows as Germany announced the possibility of cutting off crucial Russian energy imports by the year-end.

Both global oil benchmark Brent and U.S. crude’s West Texas Intermediate lost as much as 8% at the height of Monday’s selloff after No. 2 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.

Crude prices, however, bounced off Monday’s lows after Germany’s Chancellor Olaf Scholz said Europe’s largest economy might proceed this year itself with its cut off from Russian coal and oil, notwithstanding its heavy energy reliance on these.

London-traded Brent was down $5.75, or 4.8%, at $111.62 per barrel. It had fallen to as low as $108.53 earlier in the session. 

Brent rose 11.8% last week for its biggest weekly gain since the start of Russia’s invasion of Ukraine on Feb. 24.

New York-traded West Texas Intermediate, or WTI, was down $5.68, or 5%, at $108.22. WTI was down to as much as $104.52 earlier. Last week, the U.S. crude benchmark rose 8.8%.

The energy minister of the United Arab Emirates Suhail Al Mazroui also allayed oil bulls’ concerns that OPEC+ might be tempted to overcompensate the present shortage in crude by raising production beyond its standard monthly increments of 400,000 barrels per day. 

“We are not happy with higher prices, but we can't oversupply the market,”  Mazroui said in an interview with Asharq Business. “Raising production will only be done in a measured and consensual manner among OPEC+ members.”

 

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