Oil Falls as China Sticks with Covid Restrictions

Oil slumped as China’s continued adherence to its Covid-Zero policy dampened hopes of a demand rebound.

West Texas Intermediate remained little changed near $92 after a day of volatile trading. Most commodities dropped Monday as China signaled a continuation of its Covid-Zero policy. Tight fuel supplies and a weakening dollar contained the drop, at one point propelling Brent above $99 a barrel to its highest intraday since the end of August. 

Officials at China’s National Health Commission said the country will “unswervingly” adhere to current virus controls, cooling the optimism that had helped crude rally to a two-month high last week.

“Near term fundamentals have been moving toward the bullish side,” wrote Dennis Kissler, senior vice president at Bok Financial Securities, in a market note. “However, news this morning that China may not be relaxing COVID restrictions as anticipated last week is bleeding back into the market causing pressure.”

Oil has been buffeted in recent weeks by the uncertainty of demand in China, a looming Russian exports ban and the decision by the Organization of Petroleum Exporting Countries and its allies to rein in production. Gathering concerns about a global slowdown and tighter monetary policy have also swung prices. Despite concerns about long-term demand, fuel inventories are tight, thrusting Brent back toward $100 a barrel. The global benchmark traded as high as $99.56 earlier Monday.

Prices:

• WTI for December delivery lost 82 cents to settle at $91.79 a barrel.
• Brent for January settlement fell 65 cents to $97.92 a barrel.

Money managers have been betting on higher prices in the coming months. Net-bullish Brent crude bets climbed to the highest level since June last week, while options markets have seen a flurry of bullish positions taken of late.