Oil prices fall as pandemic restrictions extend in China

Oil prices fell on Thursday, after recording sharp losses in the previous session, as the extension of China’s closure measures to curb the spread of the Coronavirus exacerbated fears of a slowdown in global economic activity, which is hurting demand.

Brent crude futures lost 40 cents, or 0.4 percent, to $87.60 a barrel by 1002 GMT, close to the low recorded in late January.

US crude futures fell 41 cents, or 0.5%, to $81.53 a barrel, close to the mid-January low.

The Chinese city of Chengdu extended a lockdown covering the majority of its more than 21 million residents on Thursday to stem the spread of COVID-19. In contrast, millions more in other parts of the country were asked to avoid upcoming holidays.

However, prices received a boost from Russian President Vladimir Putin’s threat to halt the country’s oil and gas exports if European buyers impose a price ceiling.

The European Union proposed capping the price of Russian gas only hours later, raising the prospect of supply rationing in some of the world’s richest countries this winter if Moscow carries out its threat. Russia’s Gazprom has already halted flows through the Nord Stream 1 pipeline, cutting off a significant portion of European supplies.

JP Morgan said that OPEC + may need to cut production by 1 million barrels per day “to stem downward pressures in prices.”

OPEC+, which includes the Organization of the Petroleum Exporting Countries (OPEC) and its allies led by Russia, agreed on Monday to cut production by 100,000 barrels per day in October.