DNEW YORK: Oil fell 6% to its lowest level in two weeks on Monday, owing to mounting concerns about the global energy demand picture as a result of the protracted COVID-19 lockdowns in Shanghai and probable interest rate hikes in the United States.
Authorities in Shanghai have erected barricades around residential buildings. Many individuals in Beijing have begun storing food in anticipation of a similar lockdown following the discovery of a few cases of COVID-19.
“China appears to be the elephant in the room,” said Jeffrey Halley, an analyst at OANDA. “Today’s sentiment was sunk by increasing COVID-zero restrictions in Shanghai and suspicions that Omicron had spread to Beijing.”
By 11:12 a.m. EDT, Brent futures had fallen $6.17, or 5.8%, to $100.48 a barrel (1512 GMT). The price of West Texas Intermediate (WTI) crude in the United States declined $5.91, or 5.8%, to $96.16.
“Shanghai shows no indications of easing off on its tough zero-COVID policy, instead threatening to tighten COVID limits even more, perhaps hurting oil demand even more,” City Index analyst Fiona Cincotta said.
Both benchmarks were set to close at their lowest levels since April 11th. Both fell roughly 5% last week, with Brent reversing strongly after hitting a high of $139 per barrel last month, its highest since 2008.
On fears of an economic downturn in the world’s largest oil importer, the Chinese yuan was headed for its longest three-day losing streak in over four years.
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Oil gained support earlier this year as a result of limited supply following Russia’s invasion of Ukraine on February 24, which drove customers to avoid buying Russian oil due to Western sanctions. However, a European Union (EU) ban on Russian crude might tighten the market much more.
According to a story in The Times of London citing the European Commission’s executive vice president, Valdis Dombrovskis, the EU is considering “smart sanctions” against Russian oil imports.
Five traders said Russia’s NK Rosneft PAO (ROSN.MM) failed to sell oil in a jumbo tender after requiring rouble prepayment, implying that the country’s largest oil giant must find ways to transfer additional crude to Asian buyers through private transactions.
According to traders and a shipping report, a shipping unit of France’s TotalEnergies SE (TTEF.PA) has tentatively hired a tanker to load Abu Dhabi crude for Europe in early May, the first such trip in two years.
