(London) Oil prices remained down on Tuesday, after significant losses suffered the day before, still weighed down by fears of a general confinement in Beijing, capital of China, as in Shanghai, thus risking destroying demand for gold black.
Posted at 6:51 a.m.
Around 9:30 a.m. GMT (5:30 a.m. EDT), a barrel of Brent North Sea oil for June delivery was down 0.76% at $101.54.
The barrel of American West Texas Intermediate (WTI) for delivery the same month yielded 1.00% to 97.53 dollars.
China has been facing an epidemic outbreak since March that affects many provinces to varying degrees. It responds with a zero COVID-19 strategy, that is to say mainly through quarantines and massive screenings.
“These measures do not bode well for oil demand growth in the world’s largest crude oil importer,” said Tamas Varga of PVM Energy.
The hardest hit city is Shanghai, but more than a hundred positive cases have also been identified since last week in Beijing.
In Beijing, mass testing is being rolled out across the capital, raising concerns about a citywide lockdown, like in Shanghai, and what that would mean for China’s growth prospects. “, explains Victoria Scholar, analyst at Interactive investor.
The concern also affects industrial metals – of which China is a major consumer – which recorded substantial price drops on the London Metal Exchange (LME) on Monday.
The LME Index, an index that incorporates the prices of aluminium, copper, lead, nickel, tin and zinc traded on the LME, posted 4864.9 points on Monday, erasing all its gains from March and april.
“Supply concerns are putting some (upward) pressure on the price,” said Hargreaves Lansdown analyst Susannah Streeter, however, “as more and more buyers turn away from Russian oil, even if a European embargo on the crude has not been decided”.
“The destruction of demand […] compensated by the shortage of supply triggered by the financial boycotts of Russia,” said Tamas Varga, Russia being one of the main producers and exporters of crude.
For the analyst, the “fundamental question” is now “whether the economic devastation caused by the conflict in Ukraine, China’s attitude towards the outbreaks of (COVID-19) infections will outweigh the lack of Russian barrels available”.