Oil steadies after sharp 4% fall

New Delhi  — Oil prices bounced on Tuesday, steadying after a sharp fall of 4% in the previous session as worries over China’s fuel demand were soothed by the central bank’s pledge to support an economy hit by renewed Covid-19 curbs.

Brent crude futures were at $103.50, up $1.18, or 1.15%, and US West Texas Intermediate contracts climbed to $99.41, up 87c, or 0.88%, at 4.48am GMT.

Both contracts had settled around 4% on Monday, with Brent falling as much as $7 a barrel in the session and WTI dipping about $6 a barrel.

China will keep liquidity reasonably ample in financial markets, the People’s Bank of China (PBOC) said on Tuesday, a day after the central bank announced a cut to banks’ foreign exchange reserve ratio to support its economy.

“Coming on the heels of the central bank cutting the foreign currency reserve requirement ratio for banks, it provided some relief to investors,” energy market analysis provider Vanda Insights said in a note.

China’s capital Beijing expanded its Covid-19 mass testing from one district this week to most of the city of nearly 22-million, as they braced for an imminent lockdown similar to Shanghai’s stringent curbs.

“The hit from Chinese lockdowns is over 1-million barrels a day and the testing of 12 districts over the next five days will determine the next major move for crude prices,” Edward Moya, a senior market analyst for Oanda, wrote in a note.

Separately, in a bearish signal for oil markets, five analysts polled by Reuters estimated on average that US crude inventories increased by 2.2-million barrels in the week to April 22.

Stockpiles of petrol rose by about 500,000 barrels last week, and distillate inventories, which include diesel and heating oil, were expected to have decreased by 600,000 barrels.

The poll was conducted ahead of the release of the inventory report from the American Petroleum Institute, an industry group, at 8.30pm GMT on Tuesday. The official government energy information administration data will be out on Wednesday.

Analysts said that the supply-side concerns over phasing out of Russian oil from the market will continue to support prices.

Reuters