The selloff comes after the U.S. and its allies announced plans to unleash a wave of oil from strategic reserves to ease surging fuel costs. The U.S. central bank outlined plans to raise interest rates and curb its balance sheet in an effort to tame inflation, which could restrain growth.
Crude prices were also hampered after China ordered a series of lockdowns in key urban centers, including Shanghai, to quell a coronavirus outbreak. At the same time, plans by the Fed for an aggressive tightening of U.S. monetary policy to combat inflation have blunted demand for risk assets and boosted the dollar.
The move to sell almost a quarter-of-a-billion barrels from strategic petroleum reserves prompted a collapse in once-elevated time spreads.
Read more: Key oil market indicator suggests bullish sentiment is fading
While many Western companies are shunning Russian oil following the invasion, there are plenty of willing takers in Asia, especially in China and India. Cargoes of Russian Sokol crude from the Far East have sold out for next month.
China’s latest coronavirus outbreak shows no sign of abating, disrupting Asia’s largest economy. Cities are facing severe restrictions, which are curbing mobility and energy consumption.