Oil fell almost 2 dollars a barrel on Monday morning due to a resurgence of Covid-19 cases in Beijing dampened hopes of a rebound in Chinese demand, while concerns about further interest rate hikes to control runaway inflation added pressure to the market.
Beijing’s most populous district, Chaoyang, announced three rounds of mass testing to quell a “fierce” outbreak of Covid-19 that emerged last week. Extended testing would take place through Wednesday.
drudo futures Brent They were down $1.54, or 1.3%, to $120.47 by 12:13 GMT, while crude oil West Texas Intermediate (WTI) lost $1.82, or 1.5%, to settle at $118.85.
“The current drop in prices is exacerbated by warnings of a “Fierce” spread of the Covid-19 virus in Beijing by officials, which calls into question the immediate recovery in demand,” said Tamas Varga, oil trader at PVM.
The concern about further rises in interest ratesaccentuated by US inflation data on Friday that showed the consumer price index rising 8.6% last month, also pushed oil lower and weighed on financial markets.
The data alerted the markets that the Federal Reserve it could tighten monetary policy for too long and cause a sharp slowdown. The next Fed meeting ends on Wednesday with the issuance of a statement.
Oil skyrocketed in 2022 as the Russian invasion of Ukraine compounded concerns over oil supply and demand rebounded from Covid-19 lockdowns. Brent hit $139, the highest level since 2008, in March, with both benchmarks adding more than 1% last week.
Supply remains tight, with the OPEC and its allies unable to fully deliver on promised production increases due to lack of capacity in several countries, sanctions on Russiawhile output in Libya was roughly halved due to turbulence.
“The dynamics of supply and demand remain supportive of prices,” said Jeffery Halley, of the OANDA brokerage, who considers a general sale of oil unlikely “unless the US markets change their price in a total recession” and there are new lockdowns in China.
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