• WTI has recovered from earlier near $93.00 lows to the $95.00s, where it still trades nearly $2.50 lower.
• The dip to $93.00 marked WTI’s lowest since late February
• Uncertainties regarding Chinese demand as Covid-19 infections in locked-down Shanghai continue to surge were the main factor weighing on sentiment.

After hitting its lowest level since late February in earlier trade near $93.00 per barrel, front-month WTI futures have rebounded over the last few hours and are now trading back in the $95.00s. That still leaves prices down about $2.50 on the day, with global oil markets reeling in wake of an uptick in China lockdown fears over the weekend. China’s 26-million-person strong city of Shanghai, the country’s financial hub, remains in a state of absolute lockdown after Covid-19 infections hit fresh record highs over the weekend.

Oil market participants fear that the virus will spread to other cities, triggering equally strict lockdowns across the country as China continues to pursue it “zero Covid-19” strategy that was successful in the initial stages of the pandemic. However, analysts have questioned the sustainability of this strategy given new variants of the virus are much more transmissible. China is the world’s largest oil consumer (over 14M barrels per day) and widespread lockdowns could leave a significant dent in demand.

Uncertainty about the extent to which Chinese demand will be affected by lockdowns in the coming months has eased worries about an acute near-term oil shortage given disruptions to Russian exports as a result of the Russo-Ukraine war. This is the major factor weighing on the oil complex on Monday, but comes against the backdrop of a historic oil reserve release announcement from International Energy Agency member nations last week. The US and its allies will be releasing 240M barrels of crude oil over the next six months.

Recent updates have led to some major financial institutions scaling back on their bullish bets for how high oil prices might have gone this summer. Bank of America said they now don’t see Brent (currently near $100) moving back above $120 per barrel this summer and UBS said their forecast for Brent in June was now $115 (versus $125 before).