By Adedapo Adesanya
Prices of crude oil were down on Monday by more than 3 per cent amid growing worries about the global energy demand outlook due to prolonged COVID-19 lockdowns, especially in China.
Yesterday, the country intensified lockdown efforts, which had earlier centred primarily on Shanghai but have now spread to the capital, Beijing.
Investors are now concerned that increased restrictions in the world’s largest oil importer will be put in place and that more cities will be affected.
Chinese authorities also announced mass testing for all people in the Beijing district, further adding to the sense of panic, with more districts being added to the plan.
New COVID-19 deaths have now tripled in Shanghai, with reports of metal barriers being erected in some districts to help containment.
The lockdowns, which now look set to intensify, are causing supply chain issues, port congestion and factory closures, resulting in a sell-off of Chinese stocks and with China’s zero-covid policy, oil demand will be taking a hit as authorities try to bring the outbreak under control.
As a result, the price of the Brent slid 3.58 per cent or $3.82 to $102.8 per barrel on Monday as the United States West Texas Intermediate (WTI) crude dropped 2.86 per cent or $2.92 to $99.15 per barrel.
Also pressuring oil was the rising of the US Dollar to a two-year high against a basket of other currencies on the likelihood of US interest rate hikes.
A strong dollar makes oil more expensive for other currency holders.
Meanwhile, the European Union (EU) is considering “smart” sanctions against Russia’s oil industry in a bid to minimize the fallout for itself while maximizing pressure on Moscow.
The bloc has been discussing some form of an oil embargo against Russia for weeks now but has so far failed to come up with a version that would satisfy the heavily reliant importers, among them Germany, Europe’s largest economy.
“We are working on a sixth sanctions package and one of the issues we are considering is some form of an oil embargo. When we are imposing sanctions, we need to do so in a way that maximises pressure on Russia while minimising collateral damage on ourselves,” European Commission executive vice president, Mr Valdis Dombrovskis said.
Self-sanctioning from European oil buyers has already led to a shrinkage in Russian oil exports to the EU, which has been one of the factors fueling the rise in international oil and fuel prices.
Dipo Olowookere