Oil suffers weekly loss as China lockdowns, Fed pivot exact toll

Oil headed for its third weekly loss in four as lockdowns in virus-hit China dragged on and the Federal Reserve signaled that monetary policy will be tightened aggressively to contain decades-high inflation.

Oil headed for its third weekly loss in four as lockdowns in virus-hit China dragged on and the Federal Reserve signaled that monetary policy will be tightened aggressively to contain decades-high inflation.

West Texas Intermediate fell below US$102 a barrel, in a volatile trading week that has seen prices bounce in a range of several dollars. Fuel consumption in China, the world’s biggest crude importer, is expected to drop 20 per cent in April from a year ago, according to people with inside knowledge of the country’s energy industry. 

The country has imposed a series of lockdowns including in Shanghai to stamp out a fresh COVID-19 wave. The drop in fuel demand is the equivalent to a decline of 1.2 million barrels a day, the people said.

The macroeconomic picture is also creating headwinds for crude. Investors are bracing for the U.S. central bank to hike interest rates at a rapid clip, with Chair Jerome Powell signaling two or more half percentage-point increases in comments on Thursday. The pivot has boosted the dollar, making commodities more expensive for holders of other currencies.

Oil remains about 35 per cent higher this year, despite the recent weakness, as the fallout from Moscow’s invasion of Ukraine continues to rattle markets and roil crude flows. There are calls for the European Union to ban Russian oil, matching steps taken by the U.S. and U.K. Support for prices has also come from interruptions to supplies from Libya amid a wave of protests.