Beijing’s COVID warning and inflation fears resulted fallen in prices of Oil
On Monday, oil prices fell more than $2 as a flare-up in COVID-19 cases in Beijing dampened prospects for a quick increase in China’s fuel demand, while concerns about global inflation and economic development weighed on the market. By 0033 GMT, Brent crude futures had fallen $2.06, or 1.7 percent, to $119.95 a barrel, while US West Texas Intermediate crude had fallen $2.13, or 1.8 percent, to $118.54 a barrel.
Prices plummeted after Chinese officials warned of a “ferocious” COVID outbreak in Beijing on Sunday and announced plans to undertake mass testing in the capital until Wednesday. Concerns about more interest rate hikes following Friday’s significant increase in US inflation figures are also weighing on global financial markets.
In a note, Stephen Innes of SPI Asset Management wrote, “The higher greenback and stagflation fears proved to be the bullish market’s undoing.” “While China remains a huge near-term negative risk, most analysts see the gradual normalization of Chinese demand as a powerful positive for oil, despite the possibility of shutdown noise in the next weeks, because current demand is far from normal.”
Last week, both global oil benchmarks rose more than 1% on data showing robust oil demand in the world’s top consumer, the United States, despite inflation concerns, and on expectations that consumption in China, the world’s second largest consumer, would rebound after lockdown measures were lifted on June 1.
Oil producers and refineries are operating at full capacity to meet peak summer demand, while traders keep a careful eye on the impact of labour unrest in Libya, Norway, and South Korea on oil exports and consumption.
Saudi Arabia, the world’s largest exporter, planned to transfer some petroleum from China to Europe in July to bolster supplies in the West, dealers said.