Oil Maintains Stability as Traders Assess Ukraine's Fallout and China's Outbreak

West Texas Intermediate futures rose 3.2 percent Tuesday, snapping a two-day losing streak. Russia has announced the suspension of natural gas supplies to Poland and Bulgaria, as the European Union considers measures to restrict oil imports from the OPEC+ producer. Meanwhile, China is pursuing its Covid Zero policy and virus testing the majority of Beijing as an unprecedented lockdown approaches.

Since Russia's invasion of Ukraine in late February, the market has been gripped by a volatile period of trading, with the viral outbreak in China providing another source of instability. The European conflict has fueled inflation and increased the cost of virtually everything, from food to petrol.

Moscow is enforcing a threat to cut off natural gas supplies to countries who resist President Vladimir Putin's new demand for payment in rubles for the fuel. Although the EU has rejected the move in principle, payment deadlines are approaching. Meanwhile, Germany's economy minister stated that the country had already reduced its dependence on Russian oil to the point where a complete ban would be "manageable."

Brent is narrowly in backwardation following Tuesday's close to a bearish contango structure. The worldwide benchmark's prompt timespread was 38 cents in backwardation – a bullish trend – compared to a high of $4.64 in early March, immediately following Russia's invasion of Ukraine.