Rising COVID Cases cast a Pall Over China's Economy : How is it affecting the Crude market
- 28-Apr-2022 6:21 PM
- Journalist: Nina Jiang
The prices of Crude Oil fell on Wednesday as the value of the dollar rose, making barrels more expensive, while coronavirus outbreaks cast doubt on China's economy, the world's largest importer of crude oil. Crude prices were also impacted by persistent concerns about global supply constraints, which were exacerbated by another fall in US distillate and gasoline stockpiles. The prospect of limitations in Beijing's capital has hampered market optimism, especially as Shanghai, a crucial commercial hub, is currently under stringent lockdown due to an outbreak of COVID infections. On Saturday, Beijing and other parts of China tightened controls as part of the country's "dynamic clearance" strategy to eradicate the highly transmissible Omicron type. Industry experts also predict that widespread supply chain disruptions would cause delays in shipments from the foreign market, putting a damper on the country's economic growth rate this year.
Brent crude futures were down 4 cents to $104.95/barrel on April 27th. West Texas Intermediate (WTI) crude futures in the United States fell 25 cents to $101.45/barrel. Oil purchases became more expensive for holders of foreign currencies as the dollar soared to its highest level in five years. With a higher US currency and mobility constraints in China, the world's second-largest oil user, this is a risk-off situation, according to a commodity analyst.
After the US Energy Information Administration reported that oil stocks grew by only 692,000 barrels last week, below expectations, while distillate inventories, which include diesel and jet fuel, plummeted to their lowest level since May 2008, the market recovered some of its losses. Following Russia's invasion of Ukraine and subsequent sanctions imposed on Moscow by the US and its allies, energy markets around the world have been experiencing severe supply disruptions.
China's central bank said it would increase its monetary policy assistance as Beijing tries to contain a nascent COVID-19 epidemic in the capital and avoid the city-wide lockdown that has plagued Shanghai for the last month.