Oil falls on China Covid curbs, potential rate hikeswritten by Bella Palmer
Brent crude dropped $1.28, or 1.4%, to $91.56 a barrel and U.S. West Texas Intermediate crude was down $1.34 at $85.45 a barrel, or 1.5%
Oil prices fell on Monday with the global fuel demand outlook overshadowed by Covid-19 restrictions in China and the potential for further interest rate hikes in the United States and Europe.
Brent crude dropped $1.28, or 1.4%, to $91.56 a barrel by 0330 GMT, after settling 4.1% higher on Friday. U.S. West Texas Intermediate crude was down $1.34 at $85.45 a barrel, or 1.5%, after a 3.9% gain in the previous session.
Prices were little changed last week as gains from a nominal supply cut by the Organization of the Petroleum Exporting Countries and allies including Russia, a group known as OPEC+, were offset by ongoing lockdowns in China, the world’s top crude importer.
China’s oil demand could contract for the first time in two decades this year as Beijing’s zero-Covid policy keeps people at home during holidays and reduces fuel consumption.
The lingering presence of headwinds from China’s renewed virus restrictions and further moderation in global economic activities could still draw some reservations over a more sustained upside, said Jun Rong Yeap, market strategist at IG.
The overall negatives seem to outweigh the positives, said Yeap, adding the $85 mark for Brent crude prices could be in sight.
Meanwhile, the European Central Bank and the Federal Reserve are prepared to increase interest rates further to tackle inflation, which could lift the value of U.S. dollar against currencies and make dollar-denominated oil more expensive for investors.
Demand concerns centred on the impact of rising interest rates to combat inflation and China’s Covid-zero policy, Commonwealth Bank of Australia analyst Vivek Dhar wrote in a note.
Still, global oil prices may rebound towards the end of the year — supply is expected to tighten further when a European Union embargo on Russian oil takes effect on Dec. 5.
This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.