Oil slides on Chinese demand concerns as EU weighs Russian oil ban

A section of the BP Eastern Trough Area Project (ETAP) oil rig is seen in the North Sea, about 100 miles east of Aberdeen in Scotland February 24, 2014. REUTERS/Andy Buchanan/pool

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  • China’s COVID-19 lockdowns are hurting near-term demand
  • EU set to finalize new sanctions against Russia
  • Coming soon: API Provisioning Report, 2030 GMT

LONDON, May 3 (Reuters) – Oil fell around 1% on Tuesday as worries about the demand outlook due to prolonged COVID lockdowns in China outweighed support for a possible European oil embargo on Russia because of its actions in Ukraine.

Beijing, reporting dozens of new cases daily, is testing residents en masse to avoid a lockdown similar to Shanghai’s over the past month. Restaurants in the capital were closed for dinner and some buildings were sealed. Read more

Brent was down $1.30, or 1.2%, at $106.28 a barrel at 0942 GMT. U.S. West Texas Intermediate (WTI) crude fell 90 cents, or 0.9%, to $104.27.

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“The positive driver was the EU embargo and its decision to announce or not,” said Vivek Dhar, commodities analyst at Commonwealth Bank.

“Your negative factor is China’s COVID lockdown. Those are two very important themes.”

Oil hit multi-year highs this year, with Brent hitting $139 in March, the highest since 2008, after Moscow’s invasion of Ukraine exacerbated supply issues that were already fueling a rally.

The growing prospect of EU sanctions against Russia provided support. The European Commission is expected to finalize work on the next EU sanctions package against Russia on Tuesday, which would include a ban on buying Russian oil. Read more

“A possible EU-wide oil embargo could significantly undermine the already reduced availability of Russian barrels,” said Tamas Varga of oil broker PVM.

The latest round of US stocks and supply reports will also be in focus. Five analysts polled by Reuters on average forecast U.S. crude stockpiles fell 1.2 million barrels in the week to April 29.

The American Petroleum Institute industry group releases its inventory report at 8:30 p.m. GMT, followed by government figures from the Energy Information Administration on Wednesday.

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Additional reporting by Sonali Paul; Editing by Jan Harvey and Louise Heavens

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