U.S. oil prices fell sharply Monday, following on from the worst week for crude prices since November, as investors reacted to reports of progress in talks between Russia and Ukraine a new surge in Covid infections in China.
Market volatility remains elevated, however, and a weekend missile strike near the U.S. consulate in the city of Irbil, in norther Iraq, for which Iran claimed responsibility, and the suspension of talks between Washington and Tehran on the latter's nuclear program, delay any near-term injection of Iranian crude onto global markets.
Still, U.S. drillers added new oil and gas rigs for the ninth time in ten weeks last week, according to data from energy group Baker Hughes, taking the overall total to 663, the highest in nearly two years as prices entice deeper investments in near-term production.
The Energy Department also said last week that domestic oil output is forecast to rise to just over 12 million barrels per day this year, an 850,000 increase, with nearly 13 million expected per day in 2023.
"The market could be focusing more on the latest Covid developments in China. More than 3,300 new cases were reported on 12 March," said ING's head of commodity strategy Warren Patterson. "The rising number of cases has seen the city of Shenzhen go into lockdown. This will raise concern over the potential hit to demand. But also importantly, it suggests that China is not ready to let go of its zero-Covid policy."
Brent crude futures contracts for May delivery, the global pricing benchmark, were last seen $8lower on the session at $103.67 per barrel, a move that would mark a 16% pullback from the near $130 levels they reached early last week.
WTI futures for April, which are more closely tied to U.S. gasoline prices, fell $8 from Friday's close to change hands at $101.33 per barrel.
Exxon Mobil (XOM) shares were marked 1.9% lower in pre-market trading to indicate an opening bell price of $83.30 each while Chevron (CVX) slumped 2.2% to $167.00 each.
U.S. gasoline prices, however, remain welded near their highest levels on record, with the AAA pegging the average national cost per gallon at $4.325, just off last week's all-time peak of $4.331.
