(Bloomberg) — Oil edged lower at the start of the week as investors assessed the outlook for Chinese demand following a worsening coronavirus resurgence that’s led to a series of lockdowns.
West Texas Intermediate futures dropped below $98 a barrel after rising 2.3% on Friday. Virus cases continue to increase in Shanghai and there is no clarity on when restrictions will be lifted, with China pursuing a Covid Zero strategy. The flare-up has disrupted trade flows at ports and led to some refiners in the world’s biggest crude importer trimming operating rates.
China is struggling to stop the hyper-infectious omicron variant with lockdowns in several cities and repeated mass testing. Shanghai reported a record 24,943 new Covid cases on Saturday, according to the municipal government.
The oil market has seen a tumultuous period of trading since Russia’s invasion of Ukraine, which has fanned inflation and prompted the US and its allies to release strategic reserves to cool energy prices. The war is in its second month and continues to rage, despite diplomatic efforts for a cease-fire.
Brent remains in a bullish backwardation structure — where near-dated contracts are more expensive than later-dated ones — although it’s eased over the past week. The prompt timespread for the global benchmark was 58 cents a barrel in backwardation, compared with $1.53 a week ago.
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