Oil holds drop below $100 as traders weigh China’s lockdowns

Oil held its decline below $100 a barrel as investors assessed the impact of China’s Covid-19 resurgence on the outlook for global demand.

West Texas Intermediate futures were steady in early Asian trade after sliding 3.5 per cent on Monday. China expanded virus testing to most of Beijing as an increase in cases raised concerns about an unprecedented lockdown of the capital.

The world’s biggest crude importer is pursuing a Covid Zero strategy that’s hobbled large parts of the economy and sapped fuel consumption.

Oil has now given up most of the gains since Russia’s invasion of Ukraine in late February following a tumultuous period of trading. The war has led to the US and UK banning Russian crude imports, while the European Union is considering similar measures as the conflict continues.

Chinese officials on Monday night said virus testing would take place in another 11 of Beijing’s 16 districts, moving beyond just Chaoyang, where most of the infections have been detected since Friday. A weeklong lockdown in Shanghai has got even worse, with workers in hazmat suits fanning out to install steel fences around buildings with positive cases over the weekend.

Brent remains in backwardation, a bullish structure where near-dated contracts are more expensive than later-dated ones, but has narrowed significantly since early March. The benchmark’s prompt timespread was 24 cents a barrel in backwardation, compared with a high of $4.64 on March 2.

Rosneft failed to award a tender to sell millions of barrels of Urals crude as European buyers continued to stay away due to its crisis in Ukraine, according to traders. Asian oil refiners are also shunning Russia’s Sokol from the Far East due to sanctions on a tanker company that ships the cargoes.