Oil Slides 4 Percent , Below $100 on China Lockdowns, Reserves Release Plan

Brent futures sank $4.30, or 4.2 percent, to $98.48 a barrel, while WTI oil dropped $3.97, or 4.0 percent, to $94.29. Brent closed at its lowest level since March 16.

China, the world's largest oil importer, has seen a halt in fuel use as a result of COVID-19 lockdowns in Shanghai, experts at the Eurasia Group consultancy said. Shanghai, China's financial hub, began reducing lockdowns in certain areas on Monday, despite a record of over 25,000 new COVID-19 illnesses.

"Even when Shanghai's limitations are relaxed, China's zero-Covid rules will almost certainly continue to be a drag on demand," Eurasia Group said, stressing that Shanghai's lockout likely lowered China's total oil consumption by up to 1.3 million barrels per day (bpd).

To assist compensate for a deficit in Russian crude after Moscow's sanctions, IEA members, including the US, would discharge 240 million barrels of oil over the next six months.

The release of Strategic Petroleum Reserve (SPR) volumes totals 1.3 million barrels per day (bpd) over the next six months, adequate to compensate for a 1 million barrels per day (bpd) deficit in Russian oil production, according to JP Morgan analysts.

"The (SPR) release will be the biggest in history, and it has already broken the back of the WTI price curve," said Robert Yawger, executive director of energy futures at Mizuho, adding that spreads were edging closer to contango.

Contrary to popular belief, contango indicates an oversupplied market. It occurs when pricing for future months are greater than those for the current month.

In comparison, when supply fears were strong in early March, the WTI curve was in what Yawger referred to as "super-backwardation," with each month ending at least $1 a barrel lower than the previous month until November 2023.

The US dollar was on course to increase for an eighth consecutive day versus a basket of other currencies, putting upward pressure on oil prices. Oil becomes more costly for holders of foreign currencies as the dollar strengthens.

The European Union's (EU) administration is formulating recommendations for a Russian oil embargo, despite the fact that no agreement to restrict Russian petroleum has been reached.

The Organization of the Petroleum Exporting Countries (OPEC) warned the EU that sanctions on Russia might result in one of the biggest oil supply shocks in history, with no way to compensate. OPEC hinted that it will not increase oil production.

President Joe Biden of the United States and Indian Prime Minister Narendra Modi met Monday as Washington pressed its Asian partner to back its reaction to Russia's incursion.

India, the world's third-largest oil importer, has boosted its imports of Russian crude in recent months as a result of Moscow's compelled sale of oil at a deep discount after the invasion of Ukraine.

In March, India's fuel demand reached a three-year high, with petrol sales reaching an all-time high.