WTI bears stay in control, slicing through key support

• Oil loses ground as the market prices in weak demand from China.
• Russian threats to halt oil exports lends some support.

West Texas Intermediate crude is under pressure midweek, losing some 5% in Midday New York trade and taking out key support territory as the greenback rises to a 20-year high at the same time the market prices in weak demand from China.

The headlines are dominated by the Covid-19 lockdowns in China, the world's No.1 net importer. and the worries as restrictions on movements that are now impacting 46 cities. As many as 65 million people across the country are now subject to restrictions on their mobility and the dent to demand is expected to quickly ripple through international markets already grappling with fears that the global economy is barreling toward a recession.

''More infectious strains of the virus are raising concerns that authorities will be forced to more frequently lockdown areas as China persists with a zero-COVID strategy,'' analysts at ANZ Bank explained.

However, Russian threats to halt oil exports should the G-7 and European Union plan to cap prices for Russian oil go forward offered some support for oil. Nevertheless, a decision this week by OPEC+ to lower production quotas by 100,000 barrels per day has also been taken into consideration.

Analysts at TD Securities said that this signals that this group of swing producers will be increasingly active in its decision-making as we stare down the barrel of the recession. ''In turn, energy supply risks should also be bolstered by the revival of the OPEC+ put. The right tail in energy markets is fattening,'' the analysts argued.

Meanwhile, the Energy Information Administration (EIA) on Wednesday slightly raised its forecast for 2022 global oil demand while trimming its estimate for production this year.