RIYADH: Oil prices slid on Monday as a coronavirus lockdown in Shanghai hit economic activity, while the yen extended its stomach-churning descent as the Bank of Japan stood in the way of higher yields.
China’s financial hub of 26 million people told all firms to suspend manufacturing or have people work remotely in a two-stage lockdown over nine days.
The spread of restrictions in the world’s biggest oil importer saw Brent skid $3.39 to $117.26, while US crude fell $3.41 to $110.49.
Risk sentiment was helped by hopes of progress in Russian-Ukrainian peace talks to be held in Turkey this week after President Volodymyr Zelensky said Ukraine was prepared to discuss adopting a neutral status as part of a deal.
Oil demand expected to reach pre-pandemic level by fourth quarter of 2022
Energy markets are seen tightening in the near-term, with oil demand up almost 3 million barrels over the last year, Sultan Ahmed Al Jaber, chief executive of Abu Dhabi National Oil Company, or ADNOC, said on Monday.
The volatility in prices is the result of an underlying structural issue but demand is expected to reach pre-pandemic levels by the fourth quarter of this year, he told an industry event.
No producer can substitute Russian oil production, says UAE Energy Minister
Russian oil is needed by energy markets and no producer can substitute its production, United Arab Emirates energy minister Suhail Al-Mazrouei said on Monday.
He told an industry event that OPEC+ needed to stay together, stay focused and not allow politics to distract the group.
Norwegian oil workers to go on strike
About 28,500 workers at Norwegian shipyards, which include oil industry fabrication plants and other manufacturers, will go on strike from April 1 unless labor unions and employers reach a new wage deal, a state-appointed mediator said on Monday.
Firms that stand to be affected are suppliers to the oil and gas industry that include Aker Solutions with 736 workers threatening strike; Aibel with 661 employees; and Kaefer Energy with 405 employees, the unions, said.
A strike would affect the construction of ships, oil platforms, and other engineering work, but is not expected to hit output from Norway’s extensive petroleum industry, which is set for separate wage talks in May.
US oil exports surge
US oil exports have climbed following Russia’s invasion of Ukraine, and barrels of domestic oil that would typically go to the Cushing, Oklahoma storage hub are instead being exported via the Gulf Coast, traders said.
The invasion threw the oil market into disarray, as companies stopped buying Russian oil and prices skyrocketed. Worldwide buyers are looking to source crude wherever they can, and exports have risen in recent weeks from the United States, the world’s largest crude producer.
US crude exports rose to 3.8 million barrels per day for the March 18 week, the highest since July 2021, US Energy Department data showed. Cushing stockpiles are currently at 25.2 million barrels, just off a four-year low reached in early March.
Low storage levels in Canada
Meanwhile, low storage levels are becoming an issue in Canada, the world’s fourth-largest producer of crude. Storage levels at monitored locations in Western Canada remained within three million barrels of record-low utilization set in 2017 at 30.3 percent, said Dylan White, senior research analyst for oil markets at Wood Mackenzie. That number is a marker for the operational floor for storage facilities, he said.
Upcoming oil refinery maintenance, which typically occurs in the spring, could boost storage in both Canada and the United States, though balances should remain tight, Bank of America analysts said.
(With inputs from Reuters)
