Africa-Press – Namibia. ZAHRA TAYEB
CRUDE oil extended losses yesterday, with the global benchmark tumbling towards US$100 a barrel, as Covid-19 lockdowns in China and recession worries take centre stage.
Brent crude futures were last down 2,25% to US$104,68, while WTI crude fell 2,47% to US$101,32 a barrel.
The slide in oil prices stems from a combination of both demand and supply-side pressures which have come into play recently.
In China, about 30 million people have been placed under strict lockdown rules after the country reported 352 new Covid-19 cases on Sunday, as per Bloomberg.
The virus flare-up has forced the country to impose lockdown restrictions in at least six cities to curb the infection from spreading, and oil is paying the price for it as restrictions tear away at demand.
“A rise in Covid cases in Shanghai will not be helping sentiment, particularly given that China continues to pursue its zero-Covid policy, which creates a fair amount of demand risk for the market,” ING strategist Warren Patterson says.
Meanwhile, concerns that the United States (US) and Europe may soon slump into a recession are growing as both regions suffer from soaring inflation and high interest rates as energy prices surge.
“Markets remain torn between recession fears in the US, Europe, and China torpedoing growth and thus, oil consumption, and the still very tight supply/demand reality of the physical market,” Oanda market analyst Jeffrey Halley says.
Other factors that have added to the bearishness in oil include the halt in flows of Russian natural gas to parts of Europe via the Nord Stream 1 pipeline, which is undergoing seasonal maintenance.
French minister Bruno le Maire is one of a number of European leaders who have expressed concern that the shutdown could become permanent as Russia finds ways to retaliate against Western sanctions.
That’s only exacerbated the prospect of a recession hitting the global economy, subsequently depressing the outlook for demand for oil.
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