Oil slides more than 2% as China COVID lockdowns hurt sentiment

  • Crude oil futures tumbled today after hitting their highest in nearly a year earlier this week, as concerns over fresh COVID-19 outbreaks in China outweigh U.S. plans for a big stimulus package.
  • February WTI crude (CL1:COM) closed -2.3% to $52.36/bbl, trimming its weekly gain to 0.2%, while March Brent (CO1:COM) settled -2.3% to $55.10/bbl, for a 1.6% weekly loss.
  • "China's growing health crisis has led to a fall in oil as it is the largest importer of energy in the world," CMC Markets analyst David Madden says. "The Beijing administration has put 22M people on lockdown due to rising COVID-19 cases, so [oil] demand fears are in circulation."
  • "Crude has seen a resilient run in the first couple of weeks of 2021... [but] it is now approaching severely overbought levels," says James Hatzigiannis, chief market strategist at Ploutus Capital Advisors.
  • But J.P. Morgan says crude could top $60/bbl in the near term, as the market moves into deficit for the first time since 2017 on an annualized basis.
  • "We see a nasty deficit emerging later this year, already kicking off in February,” JPM's Christyan Malek tells Bloomberg. "If OPEC doesn't step in and increase production, we could see a material overshoot on oil, with prices even rising to $80."
  • The energy sector (XLE -3.9%) was today's worst stock market performer but still ended the week with a 3% gain, which kept the group well ahead of the other 10 S&P sectors.
  • Notable decliners today included OXY -7.6%, RIG -6%, COP -5.7%, MRO -4.9%, EOG -4.9%, XOM -4.8%, HAL -4.8%, SLB -4.1%, PXD -3.7%, CVX -3.5%.
  • Exxon also was weighed today by a WSJ report that the SEC has launched a probe into a whistleblower complaint that the company overvalued its Permian Basin assets.

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