Oil prices fell to their lowest levels in two weeks on Monday, extending last week’s declines, as concern increased over prolonged shutdowns due to the Covid-19 wave in Shanghai, and possible increases in US interest rateswhich will harm global economic growth and demand for oil.
In Shanghai, authorities erected fences outside apartment buildings, sparking new popular protests. And in Beijing, many have begun stockpiling food, fearing a similar lockdown following a few cases emerged.
Brent crude fell more than $5, or 5%, to $101 a barrel, its lowest since April 12. Meanwhile, US West Texas Intermediate crude fell $5, or 5%, below $97.
Oil is also weakened by the possibility of higher US interest rates, which boosts the US dollar, as a stronger dollar makes commodities priced in it more expensive for other currency holders, and tends to reflect increased risk aversion among investors.
Both benchmarks lost nearly 5% last week, due to concerns regarding demand, and Brent crude fell sharply following hitting $139, the highest level since 2008, last month.
Oil gained support from tight supplies, as the Russian invasion of Ukraine cut supplies due to Western sanctions and customers avoided buying Russian oil, but the market might narrow further with the imposition of a possible European Union ban on Russian crude.
And the newspaper “The Times” reported today, Monday, that the European bloc is preparing “smart sanctions” once morest Russian oil imports, quoting the Executive Vice President of the European Commission Valdis Dombrovskis.
On the other hand, outages in Libya provide some support to energy markets, at a time when the OPEC member state is losing more than 550,000 barrels per day of production due to the unrest, as the Zawiya oil refinery was damaged following armed clashes.
Commenting on the movement of oil prices, oil expert Muhammad Al-Shatti said that what happened in November and December 2019, China’s closure of the stock exchange and the closures of Corona, which dropped oil prices to the level of $ 20, are different from the current situation, because the markets have strong factors that boost prices related to the conflict in Ukraine. and its effect on supply.
Muhammad Al-Shatti added, in an interview with Al-Arabiya, today, Monday, that in the event of a complete closure in China, prices may fall to 80 or 70 dollars per barrel, due to supply concerns that affect the market.
Al-Shatti explained that China is an important card in the global demand for oil, and any impact on it places a ceiling on prices, and with the increase in Corona virus infections in China, prices may fall below $100 and reach $70 a barrel.
The oil expert referred to a recent report issued by the Organization of the Petroleum Exporting Countries, which expects the volume of demand for oil to decrease from 4.2 million barrels per day to 3.7 million barrels per day, and therefore there is no return to the pandemic and a decrease in demand by 25 million barrels per day.
