Oil drops as China’s Covid resurgence overshadows tight market

Oil declined as the prospect of more demand-sapping virus restrictions in China overshadowed signs of a tightening market.

Photo: Chris Helgren/Reuters/Ritzau Scanpix

West Texas Intermediate crude dropped near USD 104 a barrel after posting a loss last week in volatile trading. Virus cases continued to climb in Shanghai and other regions, with new sub-variants providing a challenge to the country’s Covid Zero strategy. Concerns that the US may tip into a recession are also hanging over the market as the central bank raises rates to combat inflation.

“Covid numbers are ticking up again,” said Stephen Innes, managing partner at SPI Asset Management. “Although the possible demand impact of a recession continues to weigh on sentiment, the prevailing view, at least for now, is that the longer-term structural issues facing the oil market will support prices.”

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