New Chinese COVID-19 Worries Weaken Oil Prices

By Adedapo Adesanya

Oil prices fell on Tuesday amid growing worries that new coronavirus cases could slow demand, offsetting supply concerns after the United States and Europe planned to impose new sanctions on Russia.

Brent crude fell 1.92 per cent or $2.06 to close at $105.5 per barrel, while the US West Texas Intermediate (WTI) traded 2.39 per cent or $2.47 lower to $100.8 a barrel.

The market reaction came after Chinese authorities extended a lockdown in Shanghai to cover all of the financial centre’s 26 million people.

Initially, there had been separate measures for the eastern and western sides, but the whole city is now subject to indefinite restrictions.

Shanghai is the largest single city to be locked down to date and this is raising tension over quarantine policies.

The important financial hub has battled a new wave of coronavirus infections for more than a month.

Reported cases have risen to more than 13,000 a day, although the numbers are not high by some international standards.

This development put to rest the initial bullishness that came when the market heard that the European Union was considering proposing a full ban on imports of Russian coal after footage continues to emerge of alleged war crimes committed by Russian troops withdrawing from Ukrainian towns.

The bloc has vowed to slap a new round of sanctions against Russia, following numerous reports and eye-witness accounts of war crimes committed by the Russian army retreating from Ukrainian cities and towns.

There is still resistance among some member states—primarily Germany—about directly targeting Russia’s energy exports, but the latest evidence of atrocities prompted more calls from within the EU for energy sanctions.

The United Kingdom urged Group of Seven (G7) and North Atlantic Treaty Organization (NATO) nations to ban Russian ships from their ports, and agree to a timetable to phase out oil and gas imports from Russia.

Prices had found support as International Energy Agency (IEA) member states were still discussing how much oil they would release.

This move supports similar moves made by the US to plan a large, coordinated oil release from strategic reserves for the second time in a month.