Oil prices fell more than $2 a barrel on Monday, marking the second consecutive weekly loss after world consumers revealed intentions to release a record volume of petroleum and oil products from strategic stores. China’s lockdowns remained in place.
Brent crude was down $2.05, or 2.0 percent, to $100.73 per barrel; West Texas Intermediate crude was down $2.17, or 2.2 percent, to $96.09. Brent oil fell 1.5 percent last week, while US oil fell 1%. The benchmarks have been at their highest volatility since June 2020 for several weeks.
The market has been keeping a close eye on developments in China, where authorities have kept Shanghai, a city of 26 million people, under lockdown because of its “zero tolerance” stance on COVID-19. China is the world’s largest importer of oil. Anxiety about China’s economy was the primary driver of the day’s drop in oil prices. Shanghai’s lockdown showed no signs of being lifted, and Guangzhou was about to begin mass virus testing.
Fears are growing that if China’s Omicron wave spreads to other cities, the country’s zero-COVID policy may result in protracted mass lockdowns, affecting both industrial output and civilian consumption.
The International Energy Agency (IEA) member countries will release 60 million barrels over the next six months. The US matches that amount as part of its 180 million barrel release announced in March. The moves intend to compensate for a drop in Russian crude due to harsh sanctions imposed on Moscow following its invasion of Ukraine.
On Monday, gold prices fell in range-bound trading as rising Treasury yields boosted the dollar and countered new fears over the Ukraine conflict. At the same time, palladium extended gains fueled by London’s decision to halt trading of the metal from Russia.
As of 0452 GMT, spot gold was down 0.2 percent at $1,941.95 per ounce; this level came after touching a one-week high of $1,949.32 earlier. Gold futures in the United States remained unchanged at $1,945.70 per ounce.
However, it is uncertain whether this will fully compensate for the shortage in Russian oil since shipments continued; India is increasing imports due to steep discounts.
According to the White House, President Joe Biden will meet digitally with Indian Prime Minister Narendra Modi on Monday at a time when the US has made it clear that it does not want India to increase its reliance on Russian energy imports.
Energy companies in the United States installed oil and natural gas rigs for the third week last week as Washington seeks more output to assist its allies in weaning themselves off Russian oil and gas.
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Chinese EconomyCommodity PricesCOVID-19 PandemicGlobal EconomyIndian EconomyOil PricesOPEC