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Oil tumbles over China’s COVID-19 surge, reserve release

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(S&P Global Platts) Crude oil futures tumbled in mid-morning trade in Asia April 11 due to growing concerns over China’s battle against a COVID-19 surge and the oil reserve release from consuming nations.

At 10:21 am Singapore time (0221 GMT), the ICE June Brent futures contract was down $2.75/b (2.68%) from the previous close to $100.03/b, while the NYMEX May light sweet crude contract fell $2.76/b (2.81%) at $95.50/b.

“Oil price gains still feel limited amid China’s COVID-19 concerns and global recession worries in the face of more hawkish central bank policies,” said SPI Asset Management Managing Partner Stephen Innes in an April 11 note, adding that the emergency oil reserve release by the International Energy Agency also weighed on prices.

Meanwhile, COVID-19 cases continued to grow in Shanghai, currently the epicenter of the outbreak in China. There were 914 symptomatic cases and 25,173 asymptomatic cases in the city as of April 10, the local government said on its official WeChat account April 11, making for a fresh record high of 26,087 cases in total.

In a grim portent for oil demand in the world’s second largest oil consumer, authorities in other cities, including Ningbo and Beijing, have begun implementing limited restrictions to curb the spread of the virus, according to media reports.

The latest developments will add to growing worries over the outlook for oil, coming after the US, followed by the IEA, announced over the last two weeks oil reserve releases totaling around 240 million barrels over the next six months.

Dubai crude swaps were lower in mid-morning trade in Asia April 11 from the previous close, though intermonth spreads were higher. The June Dubai swap was pegged at $94.74/b at 10 am Singapore time (0200 GMT), down 58 cents/b (0.61%) from the April 8 Asian market close.

The May-June Dubai swap intermonth spread was pegged at 87 cents/b at 10 am, up 8 cents/b over the same period, and the June-July spread was pegged at 71 cents/b, up 13 cents/b.

The June Brent/Dubai EFS was pegged at $5.83/b, down 43 cents/b.

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