Monday, November 28, 2022

Oil has dropped more than a dollar as China's Covid protests fuel demand concerns

Oil drops more than $1 as China's Covid protests fuel demand worries


TOKYO:Oil futures fell more than $1 early on Monday as investors remained cautious ahead of an agreement on a Western price cap on Russian oil and an OPEC+ meeting and protests in China, China's largest importer, over strict Covid-19 curbs fueled concerns about demand.

At 0110 GMT, Brent crude dropped $1.01, or 1.2 percent, to $82.62 per barrel.Crude oil from the United States fell $1.09, or 1.4 percent, to $75.19 in WTI.

The two benchmarks, which hit 10-month lows last week, have posted three back to back week by week declines.WTI fell 4.7% and Brent was down 4.6% at the end of the most recent week.

Hiroyuki Kikukawa, general manager of research at Nissan Securities, stated, "In addition to growing concerns about weaker fuel demand in China due to a surge in Covid-19 cases, political uncertainty caused by rare protests over the government's stringent Covid restrictions in Shanghai prompted selling."

WTI's exchanging range is supposed to tumble to $70-$75, he said, adding the market could remain unpredictable relying upon the result of the OPEC+ meeting and the cost cap on Russian oil.

Despite the fact that most of the world has lifted most restrictions, China, the world's largest oil importer, has continued to follow President Xi Jinping's zero-Covid policy.

On Sunday night, hundreds of protesters and police clashed in Shanghai as protests over China's stringent Covid restrictions continued for a third day and spread to several cities following a fatal fire in the country's far west.

As a result of growing dissatisfaction with Xi's zero-Covid policy nearly three years into the pandemic, the wave of civil disobedience on the mainland of China is unlike anything seen since he took office a decade ago.

In the meantime, diplomats from the Group of Seven (G7) and the European Union have been talking about setting a price limit on Russian oil that would be between $65 and $70 a barrel. This would limit the amount of money Moscow can use to pay for its military offensive in Ukraine without disrupting the global oil market.

EU diplomats stated that a meeting of EU government representatives scheduled for Nov. 25 to discuss the issue was canceled.When an EU ban on Russian crude begins on December 5, the price cap is set to go into effect.

Investors are also paying attention to the upcoming OPEC+ meeting on Dec. 4 between the Organization of Petroleum Exporting Countries and its allies.

OPEC+ agreed in October to reduce its production target by 2 million barrels per day until 2023.

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