Oil Advances as Investors Weigh China’s Covid-19 Resurgence

(Bloomberg) -- Oil climbed after a two-day decline that drove prices below $100 a barrel as investors assessed the impact of China’s rapidly spreading Covid-19 outbreak on the outlook for global demand.

West Texas Intermediate futures rose around 1% on Tuesday after sliding 5% over the past two sessions. China’s central bank pledged to increase support for the economy as authorities in Beijing expanded virus testing to most of the city, raising concerns about a lockdown of the capital. The Covid comeback has hammered fuel demand in the world’s biggest crude importer.

“The supply picture remains tight and bargain hunters appear to be swooping in,” said Howie Lee, a Singapore-based economist at Oversea-Chinese Banking Corp. Investors are still bracing for the worst in China, he added.

Chinese officials on Monday night said virus testing would take place in another 11 of Beijing’s 16 districts, moving beyond just Chaoyang, where most of the infections have been detected since Friday. A weeks-long lockdown in Shanghai has got even worse, with workers in hazmat suits fanning out to install steel fences around buildings with positive cases over the weekend.

Oil has now given up most of the gains since Russia’s invasion of Ukraine in late February following a tumultuous period of trading. The war has led to the U.S. and U.K. banning Russian crude imports, while the European Union is considering similar measures as the conflict continues.

Brent remains narrowly in backwardation, a bullish structure where near-dated contracts are more expensive than later-dated ones. The global benchmark’s prompt timespread was 21 cents a barrel in backwardation, compared with as high as $4.64 in early March just after the invasion of Ukraine.

Rosneft PJSC failed to award a tender to sell millions of barrels of Urals crude as European buyers continued to stay away due to its war in Ukraine, according to traders. Asian oil refiners are also shunning Russia’s Sokol from the Far East due to sanctions on a tanker company that ships the cargoes.

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