Oil prices drop amid China COVID curbs, possible rate hikes

An oil pump of IPC Petroleum France is seen at sunset outside Soudron, near Reims, France, August 24, 2022. REUTERS/Pascal Rossignol/File Photo

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SINGAPORE, Sept 12 (Reuters) – Oil prices fell on Monday as prospects for global fuel demand were overshadowed by COVID-19-related restrictions in China and the possibility of further interest rate hikes in the United States. United and Europe.

Brent crude futures fell $1.01, or 1.1%, to $91.83 a barrel at 0630 GMT, after settling 4.1% higher on Friday. U.S. West Texas Intermediate crude fell $1.13 to $85.66 a barrel, or 1.3%, after gaining 3.9% in the previous session.

Prices were little changed last week, with gains coming from a nominal supply cut by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, a group known as OPEC+ , were offset by ongoing lockdowns in China, the world’s largest rough importer.

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China’s oil demand could contract for the first time in two decades this year as Beijing’s zero COVID policy keeps people home on vacation and cuts fuel consumption. Read more

“The continued presence of headwinds from new virus restrictions imposed by China and the continued moderation in global economic activities may still cause some reservations about a more sustained upside,” said Jun Rong Yeap, market strategist at IG.

“The overall negatives seem to outweigh the positives,” Yeap said, adding that the $85 mark for Brent prices could be in sight.

Meanwhile, the European Central Bank and Federal Reserve are poised to raise interest rates further to fight inflation, which could boost the value of the US dollar against currencies and make dollar-denominated oil more expensive. expensive for investors.

“Demand concerns centered on the impact of rising interest rates to fight inflation and China’s COVID-zero policy,” Commonwealth Bank of Australia analyst Vivek Dhar wrote in a rating.

Still, global oil prices could rebound towards the end of the year – supply is expected to tighten further when a European Union embargo on Russian oil comes into effect on December 5.

The G7 will put in place a Russian oil price cap to limit Russia’s lucrative oil export revenues after its invasion of Ukraine in February, and plans to take steps to ensure that oil can still flow to the emerging countries. Moscow calls its actions in Ukraine “a special operation”. Read more

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Reporting by Florence Tan and Jeslyn Lerh; Editing by Kenneth Maxwell

Our standards: The Thomson Reuters Trust Principles.

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