WTI Dips Below $100 As Events In China Eyed

WTI is ~-$2.90 and Brent is ~-$3.00 to print $99.20 and $103.70 respectively at typing, with focus centering around China’s ongoing COVID outbreak and its resulting impact on Chinese energy demand.

• To elaborate on certain developments, pandemic control measures have been enacted on the district of Chaoyang (pop. ~3.5mn) in Beijing, following the detection of at least ten cases over the weekend. Worry re: the possibility of a lockdown is evident (taking reference to limited reports of observed stockpiling activity amongst residents), although such a measure has not been announced yet. Looking to Shanghai, the city continues to record ~20k fresh cases daily, with deaths rising to a record of 51 for Sunday.
• Looking ahead, authorities have doubled-down on China’s “dynamic zero-COVID” strategy, with the head of the country’s COVID taskforce saying on Friday that the policy is necessary due to medical resource constraints and the low vaccination rate amongst the elderly population. BBG source reports on Friday estimated that Chinese crude consumption for April would decline by ~20%, representing a ~1.2mn bpd decrease.
• Elsewhere, a rising chorus of growth forecast downgrades continues to weigh on the outlook for energy demand worldwide, with RTRS source reports on Friday pointing to the German government trimming its GDP growth projections for ‘22 from +3.6% to +2.2%.
• Major oil benchmarks saw little reaction to a Times report that crossed early in the Asian session, citing the European Commission’s (EC) Dombrovskis as confirming the EC’s work on “some form” of embargo on Russian crude. A note that this comes after EC President von der Leyen had in the previous week touted work on “clever mechanisms” to ban Russian oil for the upcoming sixth round of EU sanctions on Russia.