Oil price closes down at US $ 102.32 due to confinements in China due to the outbreak of COVID-19

Oil Collapses on Strong Dollar and Recession Fears

The They collapsed this Monday due to the strengthening of the dollar and fears of a recession due to the confinements in China.

A barrel of North Sea Brent for July delivery fell 5.73% to $105.94 in London. While the West Texas Intermediate (WTI) lost 6.08% to US$103.09 in New York.

The oil market is scared by the possibility of a drop in Chinese demand “and the prospect of a rise in interest rates in the world”summed up Victoria Scholar, an analyst at Interactive investor.

China’s exports stagnated in April in an unprecedented way since 2020, amid the confinement in Shanghai that severely affects activity, and the tightening of sanitary restrictions in Beijing.

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“The deterioration of the situation in China and the stubbornness of the Xi (Xinping) government in maintaining an impossible mission (the zero COVID policy) will probably cost the country and the world economy more dearly in terms of growth and oil demand in the coming years. next months”estimated Ipek Ozkardeskaya, of Swissquote bank.

The probability that the current lockdown measures will lead to eradication of the virus in China and safe reopenings seems very, very small.”, also highlighted Bjarne Schieldrop, an analyst at Seb.

Logic indicates that any reopening is followed by a new wave of infections, and then new closures, as long as policymakers maintain the current situation ” of COVID zero, said the analyst.

China is the second world consumer of crude oil and the first importer of oil.

Data published this Monday, however, showed that Chinese oil imports increased in April (+0.7%) compared to March.

“I think it’s more about the dollar” that caused the skid in oil prices on Monday, said Stephen Schork, an analyst and author of the Schork Report.

The strong dollar makes raw materials priced in dollars, such as oil, more expensive.

The yuan, the Chinese currency, fell on Monday to its lowest level against the dollar since October 2020.

This combination of factors also affected industrial metals. Aluminum and copper have lost prices since the beginning of the year. On Monday on the London Metal Exchange (LME) they traded at US$ 2,753.33 a ton of aluminum and US$ 9,270 a ton of copper, the lowest since December.

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