Oil Steadies as Traders Weigh Ukraine Fallout, China’s Outbreak

(Bloomberg) — Oil was steady in Asia — after a jumping back above $100 a barrel — as investors weighed the fallout from Russia’s invasion of Ukraine and China’s rapidly spreading Covid-19 outbreak.

West Texas Intermediate futures climbed 3.2% on Tuesday after a two-day decline. Russia said it will cut off to Poland and Bulgaria while the European Union discusses steps to restrict oil imports from the OPEC+ producer. China, meanwhile, is sticking with its Covid Zero strategy and virus testing most of Beijing as an unprecedented lockdown looms.

The market has been gripped by a tumultuous period of trading since Russia’s invasion of Ukraine in late February, with the virus resurgence in China adding another source of volatility. The war in Europe has fanned inflation and driven up the cost of everything from food to fuels.

Moscow is making good on a threat to halt natural gas flows to countries that refuse President Vladimir Putin’s new demand to pay for the fuel in rubles. The EU has rejected the move in principle but now payment deadlines are starting to fall due. Meanwhile, Germany’s economy minister said it had already cut its reliance on Russian oil enough to make a full embargo “manageable.”

remains narrowly in backwardation after nearing a bearish contango structure on Tuesday. The global benchmark’s prompt timespread was 38 cents in backwardation — a bullish pattern — compared with as high as $4.64 in early March just after the Russian invasion of Ukraine.

©2022 Bloomberg L.P.

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