It all shifted from worries about the supply side of oil to the demand side, states Phil Flynn of PRICE Futures Group.

Crude Oil (CL=F) prices are getting crushed as China's lockdown fears along with rising interest rates around the globe are cutting into global oil demand estimates. Worries about the potential for rising interest rates and Covid flareups in China are offsetting concerns about another shutdown in Libyan oil output and reports from Bloomberg that Russian oil production has fallen sharply so far in April, with the monthly average heading to ten million barrels a day, its lowest since September 2020.

Bloomberg News reported that “a Covid flareup that shut down much of Shanghai appeared to worsen over the weekend after China ordered mandatory tests in a district of Beijing and locked down some areas of the capital of more than 20 million people. Officials have warned of more cases in the coming days. The news echoed around global markets with stocks and equity futures under pressure and havens like the dollar and Treasuries gaining.”

This came as the Libyan reporter said, “Oil facilities at the Zawiya refinery had suffered damage following armed clashes on Friday evening, the National Oil Corporation (NOC) confirmed on Saturday.

“Preliminary statistics indicate that 29 sites were damaged, including oil derivatives tanks and several other tanks, and the company’s maintenance and safety teams are still carrying out work to assess and quantify the damage,” the NOC said in a statement on Facebook. It urged restraint and avert oil installations from armed confrontations, pointing out that the Zaiya oil complex had suffered severe and repeated damage during the past years due to armed clashes that erupted nearby. Zawiya witnessed intermittent clashes on Friday evening. The authorities disclosed that the cause of these clashes was a dispute between two families that evolved into violence involving the use of light and medium weapons.

The selloff in oil also came as the dollar soared and it appeared that some traders started fearing a stock market crash, yet those fears are probably over-started. The shutdown worriers also are hitting copper and other commodities across the board.

We believe that this correction should soon be over soon for oil and gas prices. The lockdown fears in China are probably a bit overstated or at least they are pricing in more fear than reality at this point. There are still significant supply-side risks and we believe that demand in the US should start to improve.

Despite the selloff, retail gas prices are edging back up. AAA reported that the “National average for unleaded is 412.3 up from 4408.0 a week ago." Distillate and diesel should also start to rise. It is at $507.7, up from 503.2 a week ago.

Learn more about Phil Flynn by visiting Price Futures Group.