Oil futures declined sharply Monday, with the U.S. benchmark touching the lowest price of the year, on track to erase nearly all of what remains of this year’s big gain, as protests over China’s strict COVID-19 restrictions stoked worries over slack crude demand from one of the world’s biggest consumers.
Price action
- West Texas Intermediate crude for January delivery CL.1, -0.66% CL00, -0.66% CLF23, -0.66% fell $ 1.37, or 1.8%, to $ 74.07 a barrel on the New York Mercantile Exchange to trade 0.4% lower year to date, according to Dow Jones Market Data. Prices for the front-month contract traded as low as $ 73.60, the lowest since Dec. 27, 2021.
- January Brent crude BRNF23, -1.65%, the global benchmark, was off $ 1.19, or 1.4%, at $ 82.44 a barrel on ICE Futures Europe, though holding on to a year-to-date gain. It traded as low as $ 80.61, the lowest intraday level for a front month since Jan. 10. February Brent BRN00, -1.05% BRNG23, -1.05%, the most actively traded contract, fell $ 1.02, or 1.2%, to $ 82.64 a barrel.
- December gasoline RBZ22, +0.89% rose 1.2% to $ 2.3554 a gallon
- December heating oil HOZ22, -0.37% fell 0.1% to $ 3.2372 a gallon.
- December natural gas NGZ22, -5.81% was down 5.9% at $ 6.61 per million British thermal units ahead of the contract’s expiration at the end of the trading session.
Market drivers
“Uncertainty around the Chinese reopening sent the barrel of U.S. crude below the $ 75/76 support, and the next natural target for the oil bears stands at the $ 70 psychological support,” wrote Ipek Ozkardeskaya, senior analyst at Swissquote Bank, in a Monday note.
Protests spread over the weekend in Beijing, Shanghai and other major Chinese cities over President Xi Jinping’s strict COVID-19 curbs. The protests follow complaints that policies aimed at eradicating the coronavirus by isolating every case might have worsened the death toll in an apartment fire in Urumqi in the northwestern Xinjiang region.
Lockdowns and other COVID restrictions were seen helping to keep a lid on crude prices in 2022. Oil surged to trade near 14-year highs following Russia’s February invasion of Ukraine, with the U.S. benchmark settling as high as $ 123.20 a barrel on March 8, while Brent saw a peak of $ 127.98 a barrel the same day.
See: China quietly eases some COVID rules after protests, but wider strategy remains
“Crude oil was the biggest casualty of the events unfolding in China, which are weighing on the demand outlook. Investors are worried that authorities will clamp down hard against protesters and tighten restrictions even more amid record high daily infections,” said Raffi Boyadjian, lead analyst at XM, in a note.
Still, Ozkardeskaya pointed out that “one factor that could slow down bleeding in oil is the upcoming OPEC meeting, scheduled for December 4.” The Organization of the Petroleum Exporting Countries could “use the Chinese excuse to further restrict outlook and hope to throw a floor under the crude selloff.”
“But the bears have the upper hand right now, and any price rallies should bump into solid resistance within the $ 77/80 range,” he said.
—The Associated Press contributed to this article.