The oil prices in West Texas Intermediate fell 4% to settle at just over $94 a barrel, the lowest since late February. In Shanghai, virus infections are on the rise, putting millions of people on lockdown with no clear indication of when the restrictions would be lifted. The increase in instances has caused port operations to be hampered, prompting some refiners to reduce crude-processing rates.

The world’s top crude importer, China, has experienced its worst Covid-19 outbreak in two years, raising concerns about demand.

Following a volatile period of trading, oil has given up most of the gains made since Russia invaded Ukraine in late February. In recent days, a weakening structure in the futures curve has indicated dwindling concerns over a shortage of sufficient supply, and there’s no hint that Russian oil supplies are dwindling.

According to John Kilduff, co-founder of Again Capital LLC, the lockdowns are “truly changing the calculus of the market that was so worried about the sufficiency of supply out of Russia.” “It’s really taken a lot of the supply fears out of the market,” he says, citing the historic release of strategic reserves.

The war exacerbated already-high inflation, prompting the United States and its allies to release strategic crude stocks in order to keep prices down. OPEC Secretary-General Mohammad Barkindo said on Monday that entirely replacing Russian barrels would be impossible, and that oil markets may lose up to 7 million barrels per day.

In the immediate aftermath of Russia’s invasion, prices soared beyond $100, but with China’s lockdowns returning, oil analysts are lowering demand projections.

As China battles to prevent the spread of the coronavirus, Shanghai reported a record 26,000 new cases on Sunday, and Guangzhou, in the south, has imposed a variety of restrictions.

Last month, as oil costs surged, factory-gate prices in China rose more than predicted, placing pressure on factories already trying to keep up with viral outbreaks.

Prices

In New York, WTI for May delivery declined $3.97 to $94.29 a barrel.

Brent crude for June delivery declined $4.30 to $98.48 a barrel.

In the seven days leading up to April 8, Russian crude oil shipments continued their upward trend that began the previous week after declining steadily since the country’s Feb. 24 invasion of Ukraine. In the first full week of April, weekly shipments reached nearly 4 million barrels per day, the highest level seen so far this year.

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