Oil futures fell more than $2 a barrel on Monday and WTI hit an 11-month low as protests over tight COVID-19 restrictions in the largest importer China raised demand concerns. Brent is at its lowest level since January 2022.
Brent crude is trading at $81.47 a barrel, down $2.16, or 2.6%, after falling to $81.16 in the early part of the session, its lowest level since January 11.
West Texas Intermediate (WTI) crude fell $2.08, or 2.7 percent, to $74.20 a barrel. It previously dropped as low as $73.82, the lowest level since December 27, 2021.
Both indicators, which hit a 10-month low last week, fell for three consecutive weeks. Brent closed the week down 4.6%, while WTI fell 4.7%.
China, the world’s largest oil importer, has adhered to President Xi Jinping’s zero-COVID policy even as much of the world has lifted most of the restrictions.
In addition to growing concerns about weak fuel demand in China due to the rise in COVID-19 cases, political uncertainty caused by the rare protests over tight COVID restrictions in Shanghai has fueled sales.
WTI’s trading range is expected to drop to $70-75, while the market is expected to remain volatile depending on the outcome of the OPEC+ meeting and the cap of Russian oil.
There have been clashes in Shanghai as COVID protests flared across China. Hundreds of demonstrators clashed with police in Shanghai on Sunday night as protests over China’s strict COVID restrictions flared for its third day and spread to several cities in the country’s far west following a deadly fire.
The downward trend in the oil market is increasing as concerns about demand in China and oil producers are not showing clear signs of cutting production further.
Oil prices could fall further if OPEC+ does not further cut its production quota or if the US does not act to replenish strategic oil reserves.
The Organization of the Petroleum Exporting Countries, known as OPEC+, and its allies had agreed to lower the production target in October by 2 million barrels per day by 2023. The Group will review the market’s outlook at its meeting on 4 December.
In addition to the OPEC+ meeting, investors also focused on the West’s plans to set a price ceiling on Russian oil.
G7 Group and European Union diplomats are discussing a price cap for Russian oil of between $65 and $70 per barrel in an effort to limit the oil revenue that finances Moscow’s military offensive in Ukraine without upsetting global oil market balances.
However, EU diplomats said that the meeting of European Union government representatives, scheduled for the evening of 25 November to discuss the issue, has been canceled. On Thursday, EU governments were split over the level to limit oil prices in Russia.
The price ceiling will take effect on December 5, when the EU begins its ban on Russian crude oil.
