By Peter Nurse
Investing.com -- Oil prices weakened Tuesday, falling to the lowest levels in a week amid fears for global growth, especially as China, the world’s top crude importer, battles a persistent COVID-19 outbreak.
By 9:05 AM ET (1305 GMT), U.S. crude futures traded 0.6% lower at $102.46 a barrel, while the Brent contract fell 0.6% to $105.26 a barrel.
U.S. Gasoline RBOB Futures were down 1% at $3.6045 a gallon.
Weakness in the price of crude is reflecting trends in global financial markets, as investors shed riskier assets on worries about interest rate rises and the resulting impact on economic growth.
The Fed stability report highlighted recession risks for the U.S. and other countries, and this follows the Bank of England warning last week that the U.K. economy will contract in 2023.
Adding to these fears is the economic slowdown in China, the world’s second-largest economy, as its two largest cities, Beijing and Shanghai, tighten curbs on movement, continuing the country's zero-COVID policy.
The lockdowns have strained China’s economy, with Chinese Premier Li Keqiang warning of a “complicated and grave” employment situation.
China's crude oil imports grew nearly 7% in April from the same month a year earlier, an increase of 4.1% on the month.
“However, cumulative imports so far this year are still down by around 4% YoY.” said analysts at ING, in a note. “We will have to wait until later this month for more detailed trade data to see where this increase in April flows originated from. Russian oil flows to China could have increased over the month, given the larger discounts that we have seen for Russian crude since the war.”
At the same time, the European Union has appeared to soften some of its proposed sanctions on Russian oil exports following pushback from some of the countries most dependent on Russian energy, Hungary in particular.
“It looks as if the latest sanction package will need to be watered down in order to be approved by all members,” said ING. “Already, there are reports that the EU has dropped part of the proposal which would have banned EU-owned tankers from shipping Russian oil to destinations outside the EU.”
The American Petroleum Institute is due to report its weekly inventory data at 4:30 PM ET, against a backdrop of record-high diesel prices.
The average cost of a retail gallon of gasoline hit $4.374 early Tuesday, according to the American Automobile Association, surpassing the former record of $4.331.