Oil prices fell sharply on Monday shutdowns in China raised concerns that the country’s zero-COVID-19 strategy will suppress energy demand in the world’s second largest economy.
U.S. oil fell 5.6% to a two-week low of $ 96.33 per barrel on Monday morning, while Brent, the world benchmark, fell 4.9% to $ 101.43 per barrel.
“The overriding sentiment today is bearish due to China’s COVID lockdowns,” Andy Lipow, president of consulting firm Lipow Oil, wrote in an email Monday.
Chaoyang, one of the largest districts in China’s capital Beijing, announced on Sunday that it will launch mass tests for people living and working in the district.
In an attempt to contain one outbreaks described as “urgent and gloomy,” Authorities in Beijing have locked up dozens of residential complexes in eight districts, forcing residents to leave their doors or complex. Residents rushed to refill with basic goods due to closure concerns.
“Rising cases and lockdowns appear to be increasingly pushing the demand of one of the world’s leading oil consumers,” said Matt Smith, lead oil analyst, Americas, at research firm Kpler.
Although the oil market hurts, China’s concerns can create a positive for consumers: They can ease the pressure on prices at the pump, which crept higher last week.
The national average for regular petrol was unchanged on Monday to $ 4.12 per. gallon, according to AAA. It’s up from the recent low of $ 4.07 per tonne. gallon earlier in the month.
While the focus now is on demand for oil, traders are on high alert against further disruptions to Russia’s oil supplies, which could cause prices to move higher again.
For example now Emmanuel Macron has secured re-election as French President Lipow said, officials in Paris are likely to ban the purchase of Russian oil “very soon.”
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