Florence Tan
SINGAPORE (Reuters) – Oil prices plunged more than 2% at the opening of Asian trade on Monday after Chinese officials reiterated their commitment to a strict COVID containment approach over the weekend, as Singapore, the world’s biggest crude oil importer, fell more than 2%. hopes of a recovery in oil demand.
Brent crude futures fell $1.58 (1.6%) to $96.99 a barrel by 2336 GMT. US Central West Texas crude fell $1.77, or 1.9%, to $90.84 a barrel, dropping to a session low of $90.40 a barrel early in the session.
“Crude oil prices plunged as Chinese authorities pledged to stick to their zero-virus policy,” said Tina Teng, an analyst at CMC Markets. “The outlook for demand could be bleak,” he said.
A stronger dollar is also weighing on oil prices, she added.
Four policymakers on the Federal Reserve Board said on Friday they would consider a smaller rate hike at the next policy meeting despite strong employment data.
Brent and WTI were up 2.9% and 5.4% respectively last week. That’s as rumors that the strict lockdown due to COVID-19 may end pushed Chinese stock markets and commodity prices higher despite no announced changes.
But at a press conference on Saturday, health officials said they would stick to a “dynamic clearing” approach as soon as COVID cases emerge.
Trade data for the world’s second-largest economy could point to a further cooling in exports later on Monday as global demand continues to soften.
“The market is still dealing with signs of weak oil demand, with already high oil prices and a weak economic backdrop in developed markets,” ANZ analysts said in a note. Demand in Europe and the US has returned to 2019 levels, he added.
“We now expect global demand to grow by only 0.6 mb/d (million barrels per day) in the fourth quarter of 2022 from the same quarter last year, and moderate next year.”
(Reporting by Florence Tan; Editing by Lincoln Feast.)
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