(Bloomberg) -- Oil demand in China is suffering from a fresh bout of high-profile virus clampdowns, with a staggered, eight-day lockdown spanning its top financial hub weighing on consumption in the world’s biggest importer.
In Shanghai, a city of 25 million people, peak morning-time congestion on Monday was 45% below year-ago levels as workers had to stay home, according to data by Baidu Inc. In the eastern side of the sprawling city, some highways were closed, with barricades erected at tunnel and bridge entrances, and some logistics companies halted trucking work from local ports. After four days, the lockdown will be shifted to the western half to allow for mass testing.
The virus outbreak in China may weigh on global crude prices that surged to the their highest since 2008 earlier this month as the war in Ukraine imperiled Russian supplies. Brent futures extended losses on Tuesday after closing 6.8% lower as traders priced in the push by authorities in China to contain the outbreak, alongside events in Ukraine and tensions in the Middle East.
Shanghai accounts for about 4% of China’s oil consumption, official data show. With the latest outbreaks there and elsewhere, consultancy firm Energy Aspects Ltd. cut its nationwide demand forecasts for March through to June, shaving it by 700,000 barrels a day for this month, 600,000 barrels a day for April, and 150,000 barrels for the other two months.
Industry consultant Rystad Energy estimated oil demand could be reduced by as much as 200,000 barrels a day for the duration of restrictions in Shanghai. Data and analytics firm Kpler noted crude inventories in the city rose to a three-week high as of March 21.
Nationwide gasoline demand has weakened as mobility drops, with consumption in some areas as much as 70% to 80% below pre-virus levels, according to local consultant JLC. With product inventories rising, Chinese state refiners may export gasoline next month, abandoning a plan to halt shipments, it said.
The deepening disruption has also severely affected services into and out of Shanghai’s main air hubs. On Monday, 87% of flights through Pudong airport were canceled, while the city’s Hongqiao airport saw 81% of two-way services scrapped, according to VariFlight, a Chinese aviation data provider.
(Updates oil price in 3rd paragraph, Rystad’s forecast in 5th paragraph.)
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