Oil slips as concerns increase over lower demand after Shanghai shutdown

Oil prices fell more than $5 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 to $115.32 and fell $5.15, or 4.3 percent, to $115.50 at 0731 GMT.

And US West Texas Intermediate crude futures recorded their lowest level at 108.28 dollars a barrel, down 5.30 dollars, or 4.7 percent, to 108.60 dollars.

Both contracts rose 1.4 percent on Friday, marking their first weekly increase in three weeks, with Brent rising more than 11.5 percent and West Texas Intermediate crude 8.8 percent.

On Sunday, the Shanghai city government said 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. Instead, 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.