Oil drops on China growth concerns as EU weighs Russian crude ban

Storage tanks at the Los Angeles Marathon Petroleum Refinery, which processes domestic and imported California Air Resources Board (CARB) crude oil, gasoline, diesel fuel, and other petroleum products, are seen in Carson, California, US, March 11, 2022. Photo taken. By a drone. Reuters / Bing Guan / Files

LONDON (Reuters) – Oil prices fell on Monday as concerns about weak economic growth in China, the world’s largest oil importer, overshadowed fears of possible supply disruptions from a possible European Union ban on Russian crude.

Brent crude futures fell $3.73, or 3.4 percent, to $103.41 a barrel by 1403 GMT, while US West Texas Intermediate crude futures fell $3.98, or 3.8 percent, to $100.71 a barrel.

Markets in Japan, Britain, India and across Southeast Asia were closed for public holidays on Monday.

China released data on Saturday showing factory activity in the world’s second-largest economy contracting for a second month to its lowest since February 2020 due to the COVID lockdown. Read more

“Slowing this far, when China is already experiencing a real estate crash and concerns about its increased regulation (until recently), is likely to be a major problem for commodity markets and the global economy,” said Tobin Gorey, a commodities analyst at the Commonwealth Bank. , in a note.

On the supply front, Libya’s National Oil Corporation said on Sunday it would temporarily resume operations at the Zueitina oil port after it declared force majeure in late April on some shipments as political protesters forced a number of oil facilities to suspend operations.

Limiting the price drop has been the European Union’s tendency to ban Russian oil imports by the end of the year, two EU diplomats said, after talks between the European Commission and EU member states at the weekend. Read more

The European Commission may spare Hungary and Slovakia the embargo due to their heavy dependence on Russian oil, two EU officials said on Monday, as the commission prepares to finalize the next set of sanctions against Russia on Tuesday. Read more

About half of Russia’s crude oil exports of 4.7 million barrels per day go to the European Union, supplying about a quarter of the European Union’s oil imports in 2020. Read more

While Western countries have refrained from buying Russian oil due to sanctions on those exports, the impact on global supplies has been mitigated somewhat as India has been picking up heavily discounted Russian shipments.

“Russia’s ability to reroute all unwanted cargo from the West to Asia is limited,” the consultancy Rystad Energy said.

“In the event of an embargo, Russia will have to reduce production even more because it lacks the storage capacity for additional crude oil volumes.”

Additional reporting by Sonali Paul. Editing by Bernadette Baum, Mark Potter and Emilia Sithole Mataris

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