PARIS: Global oil demand will be slightly lower than forecast this year in the wake of strict Covid lockdowns in China, the world's biggest importer of crude, the International Energy Agency said Wednesday. Russian oil supply, meanwhile, is expected to continue to fall in April by 1.5 million barrels per day amid its invasion of Ukraine, according to the IEA, which advises developed countries on their energy policies. But increased output from the OPEC+ group of oil producing countries and stock releases from the United States and other IEA members "should prevent a sharp deficit from developing," said the agency in a monthly report.

Rich countries have agreed to tap an additional 120 million barrels of oil from emergency reserves, with half from the United States, in a bid to calm crude prices that have soared following Russia's February 24 invasion of Ukraine. Prices fell below $100 in recent days as severe lockdowns in Shanghai raised concerns that crude demand from China would fall, only to rebound after officials eased restrictions in some neighborhoods of the country's biggest city.

"Severe new lockdown measures amid surging COVID cases in China have led to a downward revision in our expectations for global oil demand" in the second quarter of 2022 and the year as a whole, the IEA said. Weaker-than-expected demand in countries of the OECD-a group of mostly developed nations-added to the decline, the Paris-based agency said. The IEA said it now expects demand to average 99.4 million barrels per day in 2022, 260,000 barrels per day lower than previously estimated, though it will still be higher than last year by 1.9 million barrels.

Meanwhile, stock markets mostly fell and oil prices extended gains Wednesday as investors pored over data showing further spikes to inflation. US annual inflation hit a 40-year high in March, the same month that UK prices jumped at the fastest pace in three decades. Global inflation, already rocketing on supply constraints as economies look to fully reopen following pandemic lockdowns, is spiking further on fallout from the Ukraine war.

"The steepest rises in a generation have unsettled financial markets, as investors digest the unsavory prospect of tougher hikes in interest rates," noted Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. Tokyo shrugged off the gloom, however, with the benchmark Nikkei 225 closing almost two percent higher following sharp losses at the start of the week. Analysts said markets welcomed an indication that US inflation was approaching its peak.

In China, where a COVID-19 outbreak has caused mass lockdowns and snarled global trade arteries, the main stock market index lost close to one percent Wednesday. That came as official data showed China's imports shrank on-year in March for the first time in nearly two years, hit by the coronavirus and weakening consumer demand. Elsewhere Wednesday, oil prices rose further in a volatile trading week. "Oil seems to be the primary benefactor of (the) Ukraine vs Russia conflict dragging out longer," noted Stephen Innes of SPI Asset Management. Russia is a major producer of oil and gas and the war has triggered fears of supply constraints.

However global oil demand will be slightly lower than forecast this year in the wake of strict COVID lockdowns in China, the world's biggest importer of crude, the International Energy Agency said Wednesday. Russian oil supply is expected to continue to fall in April by 1.5 million barrels per day, according to the IEA, which advises developed countries on their energy policies.  In currency trading Wednesday, the yen hit its lowest level against the dollar in two decades, extending recent falls as the gap widens between Japan's ultra-loose monetary policy and Fed tightening.

Despite being traditionally considered a haven currency, uncertainty fuelled by the war in Ukraine has not caused the yen to strengthen. Instead, the Fed's move towards a more aggressive rate-tightening policy and the shock of rising oil prices in Japan-a major importer of fossil fuels-have pushed the currency lower, analysts said. - AFP