(Bloomberg) -- Oil extended its retreat -- and has now given up most of the gains following Russia’s invasion of Ukraine -- as attention turns to the prospect of reduced demand due to a Covid-19 resurgence in China.
Futures in New York dropped for a third session, to below $96 a barrel. Prices have tumbled into a bear market after losing more than 20% since closing at the highest since 2008 just over a week ago. China, the world’s biggest crude importer, has implemented several lockdowns across the country as it seeks to contain its worst virus outbreak since the pandemic began.
Oil has experienced one of its most tumultuous trading periods ever as rapid developments around the war in Europe and the ensuing sanctions drove wild price fluctuations that pushed volatility to historic levels. There are still concerns that the disruptions to Russian crude flows will squeeze an already tight market, and the conflict is raging on despite efforts for a cease-fire.
Russia’s invasion of Ukraine has roiled global commodity markets, driving up the prices of everything from fuels to metals and grains. OPEC took an unusual step in acknowledging that the war threatens to intensify the surge in global inflation in its monthly report on Tuesday. The International Energy Agency will provide its snapshot of the market later on Wednesday.
U.S. President Joe Biden will travel to Brussels next week to meet with NATO allies. Russian President Vladimir Putin told European Council President Charles Michel that Ukraine “is not showing a serious attitude toward finding mutually acceptable solutions” in talks on ending the fighting, the Kremlin said.
Russian Foreign Minister Sergei Lavrov said sanctions on his country won’t affect the Iranian nuclear deal, sparking optimism an agreement could be reached that would allow the resumption of official oil flows from the Persian Gulf producer.
Since Wuhan two years ago, China has had relative success in minimizing disruption by bringing virus cases quickly under control. Now, the geographic spread of infections and the higher transmissibility of omicron is challenging its Covid Zero strategy. The Federal Reserve, meanwhile, is expected to start tightening monetary policy on Wednesday, adding to the bearish sentiment.
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