WTI drops sharply in midday NY trade on demand concerns and China covid lockdowns

• WTI is falling further in the New York session to fresh lows on Tuesday. 
• Investors fret over holding commodity longs into economic uncertainty as China goes back into lockdown. 

Oil prices continue to sag in the New York day following a brief bid in mid-day trade. The price of West Texas Intermediate crude is carving out a fresh low for Tuesday of $95.47 so far and it is falling with momentum at the time of writing. The US dollar reached fresh 20-year highs on concerns China could enter another round of Covid-19 lockdowns, even as OPEC issued a bullish forecast for 2023 demand, so the demand side is pressuring oil prices. 

However, OPEC on Tuesday said it expects 2023 demand to rise, even as production capacity remains limited. In a Monthly Oil Market Report, the group said it expects demand to rise by 2.7-million barrels per day next year to 103-million bpd, as it expects the global economy to rise by 3.2% "supported by a still solid economic performance in major consuming countries, as well as improved geopolitical developments and containment of COVID-19 in China".

China is set to lock down cities again just weeks after lifting a two-month quarantine on Shanghai that cut the country's oil demand by more than one million barrels per day. Close to 30 million people are already under some form of movement restrictions as the nation seeks to quell resurgent Covid-19 outbreaks. The nation reported 352 new cases for Sunday, with the daily figure hovering over 300 for the past week, the highest level since late May. Mainland China has had more than 300 cases a day for past nine days.

As for positioning in the oil market, Speculators also have turned more bearish. Money managers cut net-long positions in both Brent and WTI to the lowest level since 2020, according to the CFTC data released Friday as investors fret over holding commodity longs into economic uncertainty.