Concerns over global oil demand drive prices down 3%

By Adedapo Adesanya

Crude oil prices fell more than 3% on Monday amid growing concerns about the outlook for global energy demand due to prolonged COVID-19 lockdowns, particularly in China.

Yesterday the country stepped up its containment efforts, which previously focused mainly on Shanghai but have now extended to the capital, Beijing.

Investors now fear that increased restrictions will be put in place in the world’s biggest oil importer and more cities will be affected.

Chinese authorities have also announced mass testing for all people in the Beijing district, further adding to the sense of panic as other districts are added to the plan.

New deaths from COVID-19 have now tripled in Shanghai, with reports of metal barriers erected in some districts to help with containment.

The lockdowns, which now look set to intensify, are causing supply chain problems, port congestion and factory closures, leading to a sell-off of Chinese stocks and with China’s zero-covid policy, the Oil demand will be hit as authorities try to bring the outbreak under control.

As a result, the price of Brent fell 3.58% or $3.82 to $102.8 a barrel on Monday, while US crude West Texas Intermediate (WTI) fell 2.86% or 2.92 $ to $99.15 a barrel.

The rise of the US dollar to its highest level in two years against a basket of other currencies also put pressure on oil due to the likelihood of interest rate hikes in the United States.

A strong dollar makes oil more expensive for other currency holders.

Meanwhile, the European Union (EU) is considering “smart” sanctions against Russia’s oil industry in a bid to minimize fallout for itself while maximizing pressure on Moscow.

The bloc has been discussing some form of oil embargo against Russia for weeks but has so far failed to come up with a version that would satisfy heavily dependent importers, including Germany, the world’s biggest economy. ‘Europe.

“We are working on a sixth set of sanctions and one of the issues we are looking at is some form of oil embargo. When we impose sanctions, we must do so in a way that maximizes pressure on Russia while minimizing damage. collateral on ourselves,” said European Commission Executive Vice-President Valdis Dombrovskis.

Self-punishment by European oil buyers has already led to a contraction in Russian oil exports to the EU, which has been one of the factors fueling the rise in international oil and fuel prices.

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Felix J. Dixon