Oil prices under pressure as China extends Covid lockdown

  • China, pursuing a highly nefarious zero-Covid strategy, is currently locking down Chengdu, a city of 21 million people.
  • Crude oil prices fell on the news, with the continued lockdown in China having a significant impact on oil demand in the country.
  • G7 finance ministers are meeting today to discuss a cap on Russia’s oil prices.

China has locked down the city of Chengdu from today. This is the latest demonstration of our zero Covid strategy.Chengdu, with a population of 21 million, is the second largest city in China to be locked down after Shanghai, according to Bloomberg report.

All the blockades in China this year have caused oil prices to fall, thanks to the well-documented effects of the blockades on oil demand. However, the effects tend to be temporary.

But coupled with other bearish signs, lockdown news could have a significant negative impact on oil prices. In fact, the latest lockdown news in China sent oil lower in Asian trade today.

Reuters also released a poll suggesting supply is on the rise, with OPEC expected to supply an average of 29.6 million bpd last month, the highest since April 2020.

US crude oil production has also increased and is likely to reach 11.82 million bpd in June, according to Reuters. This is also the highest price since April 2020.

Concerns over economic growth have also contributed to the bearish sentiment that has dominated oil markets in recent days. Such concerns are well justified, as the central bank appears determined to continue tightening monetary policy.

as a result, brent crude oil down to $95.11 per barrel at the time of writing, West Texas Intermediate $89 per barrel. Prices could fall further later today as G7 finance ministers meet to discuss the idea of ‚Äč‚Äčimposing a price cap on Russian oil sold on international markets.

The idea under discussion is to refuse to insure Russian oil shipments unless the oil sells below a certain price threshold.The G7 dominates the insurance market with a 90% share. increase. Russia has indicated that it will not accept price caps.

By Charles Kennedy for

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