Oil falls, pressured by China lockdowns, reserves release

Oil falls, pressured by China lockdowns, reserves release

The market has been watching developments in China, where authorities have kept Shanghai, a city of 26 million people, locked down under its "zero tolerance" for COVID-19. China is the world's biggest oil importer.

Member nations of the International Energy Agency (IEA) will release 60 million barrels over the next six months, with the United States matching that amount as part of its 180 million barrel release announced in March. The moves are aimed at offsetting a shortfall in Russian crude after Moscow was hit with heavy sanctions following its invasion of Ukraine.

"Oil is losing steam due to the joint efforts of the oil reserve release by U.S. and the IEA countries, along with weakening demand amid China extending lockdowns, where both of the manufacturing hubs, Shenyang and Shanghai, halted broad production," CMC Markets analyst Tina Teng said.

The unprecedented release of 240 million barrels, equivalent to well over 1 million barrels per day, has helped cool prices and sharply narrowed backwardation in oil price curves, where prices in prompt months are higher than those in future months.

However, it is unclear whether that will fully offset the shortfall in Russian oil as exports continued, with India, lured by steep discounts, increasing imports.

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