By Adedapo Adesanya
Oil prices dipped further on Friday as inflation rose more than expected in the United States and China imposed new COVID-19 lockdown measures.
Brent crude fell by $1.19 or one per cent to $121.88 per barrel while the US West Texas Intermediate (WTI) crude fell by $1 or 0.8 per cent to $120.34 a barrel.
US consumer prices accelerated in May as fuel prices hit a record high and the cost of food soared, leading to the largest annual increase in nearly 41 years.
This suggests that the Federal Reserve could continue with its 50 basis points interest rate hikes through September to combat inflation.
The faster-than-expected increase in inflation last month reported by the US Labor Department on Friday will force Americans to change their spending habits, which could affect oil demand.
This could change expectations that despite record high prices at the pumps, US motorists will continue driving after demand rose above 9 million barrels a day for the first time this year.
This development also heightened fears of either an outright recession or a period of very slow growth.
This adds to worries after the parts of China imposed a new lockdown and announced a round of mass testing for millions of residents.
Parts of Shanghai and Beijing are returning to lockdown measures.
China’s zero-COVID policy with immediate partial lockdowns to halt the spread of the virus and mass testing for millions of residents will spook the market.
Oil had risen more than $1 earlier in the session from fears of a potential disruption in supplies in Europe and Africa.
Norway’s oil output could be reduced if workers go on strike on Sunday, the Norwegian Oil and Gas Association (NOG) said.
Close to 900 employees on offshore platforms plan to strike from June 12 if annual pay negotiations fail.
Oil output at Libya’s Sarir field has been reduced after the ports of Ras Lanuf and Es Sider were closed and as a group threatened to close Hariga port.
The lifting of US sanctions on the Iranian energy sector dealt a near-fatal blow to reviving the nuclear deal as it began removing essentially all the International Atomic Energy Agency (IAEA) monitoring equipment installed under the deal.
