OIL FUTURES: Crude slumps under $98/b as China lockdown fears swamp war concerns

1200 GMT: Crude oil futures dived below $100/b in London trading March 15 for the first time this month, extending their retreat from near-record levels, as China locked down more than 50 million people following a new COVID-19 outbreak.

News of the new COVID-19 measures in China came after a positive market sentiment March 14 on diplomatic talks between Russia and Ukraine, even though Moscow's invasion of the country continues to build.

At 1200 GMT, ICE May Brent crude futures was down $7.70/b from the previous settle at $99.20/b while NYMEX April WTI futures fell $7.71/b at $95.30/b. Earlier in the session, the Brent contract had dropped to $97.50/b, the lowest since Feb. 23 before Russia's invasion of Ukraine.

China's daily coronavirus cases are at their highest in two years. Shenzhen is under lockdown, and other cities have been introducing tough restrictions.

These restrictions will hamper Chinese crude demand and could spark wider measures to contain a new COVID-19 wave in the region, analysts said.

"One province in the northeast of China has issued a travel ban, which is unlikely to leave oil demand in China unscathed," said Carsten Fritsch, an analyst at Commerzbank.

ING commodities analysts Warren Patterson and Wenyu Yao said in a note that "negotiations between Russia and Ukraine appear to be weighing on the market, with hopes talks lead to some form of de-escalation."

Therefore, pricing would remain sensitive to developments around the Russia-Ukraine conflict and volatility would continue, they said.

Fritsch agreed that "hopes of a ceasefire in Ukraine are behind the slide in oil."

On the supply side, Shell in Nigeria has declared force majeure for its Bonny exports earlier in the month, S&P Global Commodity Insights previously reported.

Eni took a "similar action on its Brass crude following a pipeline blast," ING said.

Nigeria has had trouble in achieving the 1.7 million b/d output that the OPEC+ deal agreed on. Nigeria is estimated to have produced only 1.54 million b/d.

More positively, US shale production has increased considerably. Data from the US Energy Information Administration showed domestic shale production is set to increase 117,000 b/d to 8.71 million b/d for April -- this puts it at precoronavirus levels of output.

Both Patterson and Fritsch also focused on India's potential to purchase Russian oil, which has become much cheaper because of Western buyers apprehensiveness of purchasing it. "India is 80% dependent on oil imports ... normally India buys only 2-3% of its oil imports from Russia," according to Fritsch. Therefore, it could sharply reduce its import bill by purchasing Russian Urals.