Oil prices fell more than $1 a barrel on Monday after Chinese officials reiterated their adherence to strict COVID restrictions over the weekend, and hopes for a resurgence in oil demand in the world’s largest crude importer were diminished.
Brent crude futures fell $1.20, or 1.2%, to $97.37 per barrel as of 0227 GMT, after previously falling as low as $96.50. West Texas Intermediate (WTI) crude fell $1.37, or 1.5%, to $91.24 a barrel, after falling to $90.40 per barrel at the start of the session.
Oil prices fell sharply as Chinese officials said they would stick to the COVID-zero policy while infected cases escalate, which could prompt further containment measures and darken the demand outlook.
Some Federal Reserve policymakers on Friday indicated they would consider a smaller rate hike at their next policy meeting, despite strong employment data.
Brent and WTI rose 2.9% and 5.4% respectively last week, as rumors of a possible end to strict COVID-19 lockdowns boosted Chinese stock markets and commodity prices despite no official announcement.
But at a press conference on Saturday, health officials said they would insist on “dynamic cleanup” approaches as soon as COVID cases emerge.
With trade data from the world’s No.2 economy later on Monday, global demand could see further cooling off as global demand continues to soften.
Demand in Europe and the US fell back to 2019 levels. The market is currently struggling with signs of weakness in oil demand driven by high prices and the weak economic environment in advanced markets.
According to some, global demand in the 4th quarter of 2022 is expected to grow by only 0.6 mb/d (million barrels per day) compared to the same quarter last year and to be moderate next year.
Oil prices are bolstered by tight supply expectations as the European Union’s embargo on Russia’s maritime crude exports began on December 5 and refineries around the world are ramping up production to meet strong diesel demand.
China’s largest private refinery, Zhejiang Petroleum, and Chemical Co., increases its diesel output, while US oil refineries will run their facilities at or near 90% capacity this quarter.
Kuwait Integrated Petroleum Industries Co (KIPIC) said on Sunday that the first phase of the Al-Zour refinery has started commercial operations, according to the state news agency (KUNA).
