Brent Crude Falls Amid Surge In Covid Cases In China

Oil prices fell by 1 US dollar on Monday while rising coronavirus cases in China dashed hopes of the world’s largest crude importer quickly reopening its economy.

Brent crude futures were down USD 1.01, or 1.1 per cent at USD 94.98 per barrel, after gaining 1.1 per cent the day before. After rising 2.9 per cent on Friday, WTI crude futures fell USD 1.11, or 1.3 per cent, to USD 87.85.

“US dollar strength appears to be weighing on oil and the broader commodities complex this afternoon,” ING's head of commodities strategy Warren Patterson said.

“There's also the possibility that the market got a little ahead of itself on Friday as a result of China's relaxation of Covid-related quarantine measures,” he added.

Commodity prices rose on Friday after China's National Health Commission revised its Covid-19 prevention and control measures to reduce quarantine times for cases’ close contacts and inbound travellers.

However, Covid-19 cases increased in China over the weekend, with Beijing and other major cities reporting record infections on Monday.

China’s demand for oil from top exporter Saudi Arabia has also remained weak, with several refiners requesting lower crude lifts in December.

On Friday, US Treasury Secretary Janet Yellen said that India can continue to buy as much Russian oil as it wants, including at prices higher than a G7 imposed price cap mechanism, as long as it avoids Western insurance, finance and maritime services that are subject to the cap.

Dollar strength also weighed on oil after comments from US Federal Reserve Governor Christopher Waller, who said on Sunday that the Fed may consider slowing the pace of rate increases at its next meeting, but that this should not be interpreted as a softening of the Fed’s commitment to lower inflation.

“This leans towards the sticky inflation or recession narrative, which is negative for oil and other risk markets,” said Stephen Innes, managing director of SPI Asset Management.