WTI pressured on worrisome covid spread in China

• Covid cases spreading in China weigh on the oil price. 
• High food and energy prices raise disruption risks and persistent underproduction from OPEC+ is considered bullish. 

US oil is under pressure and down by some 2.5% creating a fresh low on the verge of breaking 99 the figure in West Texas Intermediate (WTI). Oil is sliding amid persistent worries that prolonged COVID-19 lockdowns in Shanghai and now the prospects for stringent restrictions in Beijing. 

The Covid-19 outbreak may have been spreading in the capital for a week, city authorities said on Saturday at a press briefing who are tracking cases across multiple districts. The capital reported 22 new local cases on Saturday, national health authorities said Sunday morning.

"The city has recently seen several outbreaks involving multiple transmission chains, and the risk of continued and undetected transmission is high. The situation is urgent and grim," municipal official Tian Wei told reporters Saturday. "The whole city must act immediately."

However, with respect to risks to the price of oil, analysts at TD Securities argued that ''these forces are transient in nature, and crude oil's impressive resilience in the face of these temporary headwinds highlights that prices are coiling towards a breakout.''

Moreover, the analysts added that the trough in Chinese mobility may already be behind us. ''While the nation continues to battle the spread of Covid-19, our tracking of congestion data for the 15 largest cities in China by vehicle registrations shows a +0.6% increase in mobility on the week (or +1.3% on the month). Demand for energy products is firming once more, driving a tightening in crude oil timespreads and cracks, and energy supply risks should remain elevated.''

The analysts went on to say that the ''persistent underproduction from OPEC+, related to a decade of underinvestment, along with stretched global spare capacity and critically low inventories provide little buffer for any further disruptions. Yet, high food and energy prices raise disruption risks associated with a higher likelihood of unrest across the globe. This informs our decision to re-engage upside in far-dated Brent.''