Oil falls after closing in Shanghai, concerns about demand

Oil prices fell to a two-week low on Monday, extending last week’s losses. Concern grew that an extension of anti-Covid-19 closures in Shanghai and potential US interest rate increases would hurt global economic growth and oil demand.

In Shanghai, the authorities erected fences outside apartment buildings, sparking new public anger. In Beijing, many began stockpiling foodstuffs, fearing a similar closure after the emergence of a few infections.

By 0913 GMT, Brent crude futures fell $4.63, or 4.3 percent, to $102.02 a barrel and touched $101.94 earlier, the lowest since April 12.

West Texas Intermediate crude futures fell $4.11, or 4 percent, to $97.96 a barrel.

Oil also weakened with the possibility of a US interest rate hike, boosting the dollar. A strong dollar makes goods priced more expensive for holders of other currencies.

Both benchmarks lost nearly five percent last week due to concerns about demand, and Brent crude fell sharply after hitting $139 last month, its highest since 2008.

Oil gained support from the tight supply. Russia’s invasion of Ukraine has already cut supplies due to Western sanctions and customers have avoided buying Russian oil. Still, the market could see more tight supplies as the European Union may impose a ban on Russian crude.

On Monday, The Times reported, citing European Commission Executive Vice President Valdis Dombrovskis, that the bloc was preparing “smart sanctions” targeting Russian oil imports.

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