Part of the BP Eastern Trough Area Project (ETAP) oil platform is visible in the North Sea, about 100 miles east of Aberdeen in Scotland, February 24, 2014. REUTERS / Andy Buchanan / pool
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- Blockades in China over COVID-19 are damaging demand in the short term
- The EU is preparing to finalize additional sanctions against Russia
- Crude oil inventories in the United States probably fell last week – poll
- Upcoming: API delivery report at 4:30 p.m. ET / 2030 GMT
May 3 (Reuters) – Oil prices fell more than 2% on Tuesday as worries about demand stemming from prolonged blockades in China over COVID-19 exceeded the prospect of a European embargo on Russian oil.
Beijing is massively testing residents to prevent a blockade, similar to the one in Shanghai last month. The capital’s restaurants were closed for dining, while some apartment blocks were closed. Read more
Brent crude fell $ 2.61, or 2.4 percent, to $ 104.97 a barrel. US crude oil West Texas Intermediate (WTI) ended at $ 2.76, or 2.6%, down $ 102.41.
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“There are real concerns that China’s demand, which is a huge factor in global demand, will remain strong in 2022,” said Gary Cunningham, director of Tradition Energy.
However, prices remain high, with Brent oil reaching $ 139 in March, the highest level since 2008 after Russia’s invasion of Ukraine heightened supply concerns that had already sparked a rally.
The European Union is working on a sixth round of sanctions against Russia, with officials saying European Commission President Ursula von der Leyen is expected to outline plans Wednesday, including a ban on Russian oil imports by the end of this year. Read more
Phil Flynn, an analyst at Price Futures Group, said price action is likely to remain volatile as traders assess the impact of China’s blockade on Western oil sanctions ahead of Wednesday’s meeting with the US Federal Reserve.
“We have a market that is moving and responding from title to title in a very volatile trade range,” Flynn said.
Also in focus will be the latest round of inventory and supply reports in the United States. Nine analysts polled by Reuters estimated that crude oil inventories fell by 800,000 barrels last week.
The American Petroleum Institute’s industrial group released its inventory report at 4:30 p.m. EDT (2030 GMT), followed by government data on Wednesday.
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Additional reports by Alex Lawler and Sonali Paul Edited by Marguerite Choi, David Gregorio and David Goodman
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