Worsening Covid spread in China to weigh on crude prices

Brent first nearby prices opened Monday’s trading session in negative territory just above the $100/b mark, pressured by a rising number of Covid cases in the Shanghai area with no clarity on when restrictions will be lifted. The massive crude stock releases from strategic reserves announced since the beginning of the month continue to weigh on market sentiment as well.

Nevertheless, surging insurance costs for ships sailing to ports in the Black Sea may hamper the movement of Russian cargoes from the region and tighten further Russian crude oil exports.

Note that the number of active US oil rig increased to a two-year high at 546 according to Baker Hughes figures released on Friday, suggesting that U.S. producers might have decided to start ramping up activity significantly. As a reminder, US crude oil production increased to a year-to-date high at 11.8 Mbd last week, but still below their pre-covid level at 13 Mbd.