Oil drops about 7% on fears of weak Chinese demand

Oil prices fell more than 7 percent on Monday, as concerns grew about slowing fuel demand in China after authorities in the country’s financial hub, Shanghai, said they would implement a two-stage shutdown to contain an increase in coronavirus cases.

Brent crude futures fell $8.17, or 6.8 percent, to $112.48 at the settlement.

US West Texas Intermediate crude futures fell $7.94 a barrel, or about 7 percent, when they settled at $105.96.

This week, Brent rose by about 12 percent and West Texas Intermediate by about nine percent.

The Shanghai city government said on Sunday that all businesses and factories would shut down or have employees work remotely as part of a two-phase shutdown over nine days, after the city set a new record for asymptomatic cases.

Public transportation, including transportation services, will also be suspended during the closure, further reducing fuel demand.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies known as OPEC+ are scheduled to meet on Thursday.

OPEC + has so far resisted calls from major consuming countries, including the United States, to increase production. OPEC+ has been increasing production by 400,000 barrels per day every month since August to mitigate the impact of cuts made when the Covid pandemic affected demand.