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Brent crude futures slid as low as $115.32 a barrel and were
trading down $4.53, or 3.7%, at $116.12 at 0943 GMT.
U.S. West Texas Intermediate (WTI) crude futures hit a low of
$108.28 a barrel, and were down $4.55, or 3.9%, at $109.35.
Both benchmark contracts rose 1.4% on Friday, notching their
first weekly gains in three weeks, with Brent surging 11.8% and
WTI climbing 8.8%.
Shanghai has entered a two-stage lockdown of 26 million people
on Monday in an attempt to curb the further spread of the
coronavirus.
"This is also prompting growing concerns that China's strict
zero-Covid policy will lead to repeated lockdowns in key
business centres," said Commerzbank analyst Carsten Fritsch in a
note.
Oil demand in China, the largest crude importer globally, is
expected to be 800,000 barrels per day (bpd) softer in April
compared with "normal" levels as a result, said Bjarne
Schieldrop, chief commodities analyst at SEB bank.
Hopes for reconciliation from peace negotiations between Russia
and Ukraine, which could start in Turkey on Tuesday according to
the Kremlin, also weighed on prices.
And the bullish reaction to a missile attack by Yemen's Houthis
on a Saudi oil distribution facility had ran its course on
Friday, said Kazuhiko Saito, chief analyst at Fujitomi
Securities.
But he expected the oil market to turn bullish when the
Organization of the Petroleum Exporting Countries and allies,
known as OPEC+, meet on Thursday to discuss a planned 432,000
bpd increase in production quotas. The group, which has so far
resisted calls to accelerate production rises to ease tight
crude supply, was "less likely to raise oil output at a faster
pace than in recent months," Saito said.
And supply deficits are looming, as April spot volumes of
Russian crude will struggle to find buyers, analysts said.
Russia's crude flows have been little affected in March as most
volumes were contracted pre-invasion.
"Expectations are that 2.5 m bl/d of Russian crude and products
will be lost in April," Schieldrop said, adding that the diesel
shortages will increase demand for Brent crude and light sweet
crudes.
OECD stockpiles are at their lowest since 2014.
To help ease tight supply, the United States is considering
another release of oil from the Strategic Petroleum Reserve (SPR),
but this could be limited given already low inventories.
U.S. drillers added oil rigs for a 19th consecutive month but at
the slowest pace since 2020 even though the government urged
producers to boost output.
(Additional reporting by Yuka Obayashi in Tokyo, Sonali Paul in
Melbourne and Florence Tan in Singapore; editing by David Evans)
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