Oil prices fell to near their lowest levels in 2022 on Monday as street protests against strict Covid-19 curbs in China, the world’s biggest crude importer, stoked concern about the outlook for fuel demand.
Brent crude dropped $2.66, or 3.1%, to trade at $80.97 a barrel at 10am GMT, after diving more than 3% to $80.61 earlier in the session — its lowest since January 4.
US West Texas Intermediate (WTI) crude slid $2.39, or 3.1%, to $73.89 a barrel. It fell as far as $73.60 earlier, its lowest since December 22 2021.
Both benchmarks, which hit 10-month lows last week, have posted three consecutive weekly declines.
“On top of growing concern 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-19 restrictions in Shanghai, prompted selling,” said Hiroyuki Kikukawa, GM of research at Nissan Securities.
Markets appeared volatile ahead of an Opec+ meeting this weekend and a looming G7 price cap on Russian oil.
China has stuck with President Xi Jinping’s zero-Covid-19 policy even as much of the world has lifted most restrictions.
Hundreds of demonstrators and police clashed in Shanghai on Sunday night as protests over the restrictions flared for a third day and spread to several cities in the wake of a deadly fire in the country’s far west.
Oil cartel Opec+ will meet on December 4. In October, Opec+ agreed to reduce its output target by 2-million barrels per day through 2023.
Meanwhile, Group of Seven (G7) and EU diplomats have been discussing a price cap on Russian oil of between $65 and $70 a barrel, with the aim of limiting revenue to fund Moscow’s military offensive in Ukraine without disrupting global oil markets.
But EU governments were split on the level at which to cap Russian oil prices, with the effect being potentially muted.
“Talks will continue on a price cap but it seems it won’t be as strict as first thought, to the point that it may be borderline pointless,” said Craig Erlam, senior markets analyst at Oanda
“The threat to Russian output from a $70 cap, for example, is minimal given it’s selling around those levels already.”
The price cap is due to come into effect on December 5 when an EU ban on Russian crude also takes effect.