Oil Update — China lockdown pushes crude down; EU seeks alternatives

RIYADH: Oil prices slipped $2 a barrel in early Asian trading on Monday, following a second straight weekly decline after world consumers announced plans to release a record volume of crude and oil products from strategic stocks and China lockdowns continued.

Brent crude fell $2.04, or 2 percent, to $100.74 a barrel at 0139 GMT, while US West Texas Intermediate crude lost $1.94, or 2 percent, to $96.32. 

Last week, Brent dropped 1.5 percent while US oil slid 1 percent. 

Lockdown in Shanghai; IEA to release 60 million barrels

The market has been watching developments in China, where authorities have kept Shanghai, a city of 26 million people, locked down under its “zero tolerance” for COVID-19. China is the world’s biggest oil importer.

Member nations of the International Energy Agency will release 60 million barrels over the next six months, with the United States matching that amount as part of its 180-million-barrel release announced in March. The moves aim to offset a shortfall in Russian crude after Moscow was hit with heavy sanctions following its invasion of Ukraine.

EU seeks alternatives to Russian oil and gas

The EU may set more ambitious targets for its transition to renewable energy as it seeks alternatives to imports of oil and gas from Russia, EU climate policy chief Frans Timmermans said on Sunday.

The EU’s 27 member states have agreed to collectively reduce their net greenhouse gas emissions by 55 percent from 1990 levels by 2030, a step toward “net-zero” emissions by 2050.

Following Russia’s invasion of Ukraine in February, the European Commission has also proposed that Europe cut imports of Russian gas by two-thirds this year and is drafting plans to phase them out by 2027.

The Commission is to propose a “Repower EU” plan in May for how the bloc can quit Russian fossil fuels.

“What we will do in the next couple of weeks is work toward what I call the Repower EU initiative, and as part of that, we want to accelerate the energy transition. So, in that context, we might revisit our targets,” Timmermans told reporters during a visit to Cairo.

Biden to speak to Indian PM on Russian oil imports

Meanwhile, US president Joe Biden will meet virtually with Indian Prime Minister Narendra Modi on Monday, the White House said, when the US has made clear it does not want to see an uptick in Russian energy imports by India.

“President Biden will continue our close consultations on the consequences of Russia’s brutal war against Ukraine and mitigating its destabilizing impact on global food supply and commodity markets,” Press Secretary Jen Psaki said in a statement on Sunday.

US Deputy National Security Adviser for International Economics Daleep Singh said the US would not set any “red line” for India on its energy imports from Russia but does not want to see a “rapid acceleration” in purchases. 

Lured by steep discounts following Western sanctions on Russian entities, India has bought at least 13 million barrels of Russian crude oil since the country invaded Ukraine in late February. That compared with some 16 million barrels for the whole of last year, according to Reuters. 

(With inputs from Reuters)