Zero covid
China’s COVID-19 woes continued to worsen with 51 new deaths reported on April 24, the highest one-day toll to-date, up from 39 the day before, according to media reports. The worsening infection rate has led to tightening enforcement and subsequently a hard lockdown in Shanghai.
“For oil, reports that Chinese oil demand has fallen by the most since the Wuhan lockdown of 2020 reversed any thoughts of a weekend rally,” SPI Asset Management Managing Partner Stephen Innes said in an April 24 note.
“China’s zero-COVID policy means that oil demand will be taking a hit as authorities try to bring the outbreak under control,” Warren Patterson, head of commodities strategy at ING said in an April 25 note. “Refiners have already cut operating rates significantly due to lower demand. There are reports that state refiner, Sinopec, cut rates at two refiners in Shanghai by around 18% over the first 20 days of April.”
Tightening monetary policy
Meanwhile, the US Federal Reserve’s increasingly aggressive stance on tightening monetary policy, with a 50 basis point interest rate hike expected, has rattled financial markets and raised the possibility of an economic recession, industry sources said. Tighter credit spurred consumers and companies to further rein in spending, which is weighing on demand sentiment.
According to the latest forecast by independent research firm Rystad Energy on April 22, global oil demand is expected to fall by 1.4 million b/d to 99.6 million b/d on average, with it not expected to recover until 2023.
Elsewhere, Libya’s 120,000 b/d Zawiya refinery has been damaged due to armed clashes on April 22, the state-owned National Oil Corp said.
According to an earlier report by S&P Global Commodity Insights, this exacerbated oil supply disruptions in the OPEC member, which has called force majeure on a number of fields and ports due to ongoing protests. The North African producer pumped 1.07 million b/d of crude in March.
Dubai crude swaps and intermonth spreads were lower in mid-morning trade in Asia April 25 from the previous close.
The June Dubai swap was pegged at $97.83/b at 10 am Singapore time (0200 GMT), down $3.28/b (3.24%) from the April 22 Asian market close.
The May-June Dubai swap intermonth spread was pegged at $2.08/b at 10 am, up 2 cents/b over the same period, and the June-July intermonth spread was pegged at $1.66/b, up 4 cents/b.
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Source: SP Global
