Oil ETFs plunge as China reinstates lockdowns
Crude oil-linked exchange-traded funds fell on Thursday as Shanghai enacted new COVID-19 lockdown measures, stoking concerns about China’s demand outlook.
Thursday, the United States Petroleum Fund (NYSEArca: USO)which tracks West Texas Intermediate crude oil futures, and the US Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, both fell 1.0%. Meanwhile, WTI crude oil futures fell 0.5% to $121.5 a barrel, and Brent crude futures fell 0.6% to $122.9 a barrel. .
Shanghai reinstated movement restrictions to help quarantine the spread of new COVID-19 cases, contributing to greater uncertainty over a recovery in fuel demand in one of the largest oil-consuming economies in the world. world, Bloomberg reported. The financial hub only just lifted a two-month shutdown in early June, but Beijing’s zero-tolerance policy against COVID-19 has helped the government respond quickly to any new clusters of infections.
“Crude futures are also in an overbought situation and a corrective phase is certainly due,” Dennis Kissler, senior vice president of trading at BOK Financial, told Bloomberg. “Prices need to take a breather at some point and possible new COVID issues in China are helping this morning.”
Crude oil prices have surged this year following a global economic rebound following the COVID-19 pandemic, and the Russian-Ukrainian war has further contributed to supply issues, causing global supply to tighten .
A key OPEC member, the United Arab Emirates, has warned that prices are still “far” from their peak and even added that China’s impending recovery could weigh more on the market.
Additionally, the peak summer gasoline demand season in the United States could push crude oil prices higher going forward.
“I think higher energy prices are here for the rest of the year unless we see a breakthrough allowing a significant amount of crude to come back into the market,” Andrew Lipow, president of Lipow Oil Associates.
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