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- Oil prices tumble as a two-stage lockdown in Shanghai brought about fears of weaker fuel demand
- The lockdown across the financial hub of China will affect some 26 million people, with bridges and tunnels in the city closed and highway traffic restricted
- Oil markets are buffeted on one side by the Shanghai lockdown and on the other by the ongoing war between Ukraine and Russia
- Members of the Organization of the Petroleum Exporting Countries and its allies (OPEC+) will meet on Thursday to discuss oil supply and if the group needs to raise oil output at a faster pace than in recent months
Oil prices tumbled on Monday as a two-stage lockdown in Shanghai brought about fears of weaker fuel demand.
China has been battling its largest outbreak of COVID-19 since the start of the pandemic, but the country is continuing to enforce its ‘no-COVID’ stance on the virus, with millions of people placed into lockdown over the past few weeks.
This is not to mention the ongoing supply concern across the oil market as Russia’s military invasion of Ukraine continues. With Russia the world’s second-largest crude oil exporter and China the world’s largest importer, oil markets have been rocked back and forth.
On Monday, Brent crude slumped more than four per cent, or almost US$5 (A$6.65), to below US$115.70 per barrel. West Texas Intermediate was down to US$108.72 a barrel.
This came after both benchmark contracts rose on Friday.
The Shanghai lockdown will see some 26 million people called to isolate across the financial hub of China, with bridges and tunnels in the city closed and highway traffic restricted. The lockdown effectively splits the city in two along the Huangpu River for nine days as officials carry out “staggered” testing.
Nevertheless, while oil prices have dipped on Monday, CEO of Emori Fund Management Testu Emori told Reuters prices would likely remain above US$100 a barrel for “a while” as global supply only tightens amid economic sanctions against Russia.
The Organization of the Petroleum Exporting Countries and its allies (OPEC+) has so far resisted calls to speed up the pace of its ramp-up of oil output.
The group has been raising output by around 400,000 barrels per day each month since August to unwind drastic cuts made at the start of the COVID-19 pandemic.
Despite calls to quicken the pace of output increases, OPEC+ members have remained cautious.
Alliance members will meet again on Thursday to discuss oil supply and if it needs to raise oil output at a faster pace than in recent months.
