(Bloomberg) — Oil fell as supply returned in nations that had suffered outages while traders also weighed the impact of coronavirus outbreaks in China.
West Texas Intermediate futures fell in New York as much as 1.4%, as a stronger dollar reduced the appeal of commodities priced in the currency. Production in OPEC-member Libya increased to 900,000 barrels a day after pipeline maintenance was completed, although some of its ports could be closed for the next week due to bad weather. Some output was also restored in Kazakhstan following widespread unrest last week.
Traders are also focused on China, which is continuing to battle Covid-19 outbreaks. The world’s largest oil importer ignited a mass testing blitz in the northern port city of Tianjin as the country strives to maintain its zero-tolerance approach to the virus amid more transmissible variants.
Crude has made a strong start to 2022, pushing higher on a combination of optimism about global demand coupled with interruptions to supplies. That’s tightened the market, helping near-term timespreads firm into a bullish, backwardation structure. While the Organization of Petroleum Exporting Countries and its allies have agreed to boost output further, there’s concern the group may not be able to deliver the planned amount in full.
The Brent market is in backwardation, a bullish pattern marked by near-term prices commanding a premium to those further out. The global benchmark’s prompt spread was 60 cents a barrel in backwardation on Monday, up from 41 cents a week ago.
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