Oil prices slumped nearly 6% to their lowest level in nearly two weeks in trading earlier this week. This extended last week's decline as concerns grew that the prolonged Covid-19 lockdown in Shanghai and a potential hike in US interest rates would hurt global growth and energy demand.
Art (25/4) at 21.00 WIB, the price of Brent crude oil for delivery contracts in June 2022 fell by US$6.29 or 5.9% to US$100.36 per barrel. Even Brent had touched US $ 100.10 earlier in the session, the lowest since April 12.
After three dollars, the price of West Texas Intermediate (WTI) crude oil for delivery in June 2022 also fell by US$ 5.75 or 5.6% to US$ 96.32 per barrel.
The negative catalyst that pushed down prices came after authorities in Shanghai erected fences outside residential buildings, sparking public outrage. In Beijing, many people have started stockpiling food, fearing a similar lockdown after several cases of Covid-19.
"It seems China is the elephant in the room," said Jeffrey Halley, analyst at OANDA. "The tightening of Covid-zero restrictions in Shanghai, and the Omicron fears that have spread in Beijing, crushed sentiment today."
"Shanghai shows no signs of letting go of its strict zero-Covid-19 policy; instead the country vows to step up enforcement of Covid-19 restrictions, which could hurt oil demand further," said City Index analyst Fiona Cincotta.
Oil prices were also pressured by the prospect of higher US interest rates, which boosted the US dollar. A strong greenbacj makes commodities traded in US dollars more expensive for holders of other currencies and tends to reflect increased risk aversion among investors.
Both benchmark oil prices plunged nearly 5% in the last week on demand concerns and Brent has fallen sharply after hitting $139 a barrel last month, its highest level since 2008.
Oil finds support from tight supplies. Russia's invasion of Ukraine has cut supply due to Western sanctions and customers are avoiding buying Russian oil, but markets could tighten further with a potential EU ban on Russian crude.
The Times reported on Monday that the bloc was preparing "smart sanctions" against Russian oil imports, citing the European Commission's executive vice president, Valdis Dombrovskis.
The blackout in Libya also provided support. OPEC members lost more than 550,000 bpd in production due to the unrest, with the Zawiya oil refinery suffering damage after armed clashes.
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