Oil slumped on Tuesday, extending losses of nearly 2% in the previous session, as the strengthening US dollar and the flare-up of COVID-19 cases in China raised concerns that global demand would slow.
Brent crude futures fell 21 cents, or 0.2%, to $95.98 as of 0618 GMT, after falling $1.73 in the previous session.
West Texas Intermediate (WTI) crude was down 31 cents, or 0.3%, to $90.82 a barrel after losing $1.51 in the previous session.
The dollar hit multi-year highs on Tuesday amid concerns that rising interest rates and geopolitical tensions are plaguing investors.
A strong dollar reduces demand by making oil more expensive for buyers using other currencies.
Fed Vice Chairman Lael Brainard said on Monday that interest rate hikes are starting to slow the economy, but that the full burden of tight policy will not be felt in the coming months.
Strong employment data strengthened expectations for a 75-basis point rate hike at next month’s Fed meeting, posing a downside risk to global oil demand.
Analysts say the zero-COVID-19 policy in China ahead of the Communist Party Congress undermines demand.
Cases of COVID-19 in the world’s second-largest oil consumer rose to their highest level since August. Service activity in September contracted for the first time in four months as pandemic restrictions tightened.
In response to the increase in cases, Chinese authorities have stepped up testing in Shanghai and other megacities, in addition to extending lockdown periods and closing some public spaces where the virus could spread.
Limiting losses, the Organization of the Petroleum Exporting Countries and its allies, including Russia, decided last week to cut production targets by 2 million barrels per day, further raising concerns about tightening oil supplies.
The signal sent by OPEC+ to stabilize or increase prices in response to short-term market dynamics, with the common view that demand growth will outpace supply growth for the rest of the year, is critical.
While EU sanctions on Russia’s crude oil and petroleum products will come into effect in December and February respectively, the bloc reached a final agreement last week for a new set of sanctions, including a price cap on Russia’s oil exports.
Oil Minister Hardeep Singh Puri said India is maintaining a “healthy dialogue” with Russia and will look into the situation after an announced ownership renewal on the Sakhalin-1 oil and gas project.
Russia on Friday issued a decree allowing Exxon Mobil to take a 30% stake, giving a Russian state-owned company the power to decide whether foreign shareholders, including India’s ONGC Videsh, can continue their involvement in the project.
