Crude Oil Prices Decline On Fresh Covid Worries In China

At the time of writing this copy, both the major benchmarks of crude Brent and WTI are trading with a cut of between 1.8-2%, with prices at $105 and $102 per barrel levels.

The prices are on a drawdown as fresh concerns on China Covid worries and hence the weak demand outlook weighed on the commodity.

"Growing fears of a recession and continued sluggish demand in China are pulling oil prices lower, though the current supply-demand balances remain precarious," analysts from consultancy Eurasia Group said in a note as quoted by the Reuters report.

"While China may take a more targeted approach in trying to squash any outbreak, we will need to see how this plays out given the country's COVID zero policy," said Warren Patterson, head of commodity research at ING.

"Overall, demand concerns are still driving price action. However, fundamentals are constructive, given the tight supply situation which is set to continue for at least the remainder of the year. As a result, we expect downside in prices will be limited."

Western sanctions on Russia over the war in Ukraine, which Russia calls a "special military operation", have disrupted trade flows for crude and fuel added the report.

Nevertheless amid such a larger set-up there is also anticipated further disruption in the crude oil supply. Also, the inventory with the OPEC is running low.

"Saudi Arabia is not expected to add significant volumes in the near term, despite President Joe Biden's impending visit, as Riyadh will prioritize its commitment to market management and keeping spare capacity for emergency losses," the Eurasia analysts said in a Reuters report.