Oil prices fell near their year lows on Monday as street protests against strict Covid-19 curbs in China, the world's largest crude importer, fueled concern about the outlook for fuel demand, according to Reuters.
Brent crude fell USD 2.71 or 3.2 per cent to USD 80.92 per barrel at 12.00 p.m. (GMT), after falling more than 3 per cent earlier in the session to USD 80.61, its lowest since January.
US West Texas Intermediate (WTI) crude fell USD 2.31, or 3 per cent to USD 73.97 after hitting a low of USD 73.60 on December 22 last year.
Both benchmarks have dropped three weeks after reaching 10-month lows last week.
“On top of growing concerns about weaker fuel demand in China as a result of an increase in Covid-19 cases, political uncertainty caused by rare protests in Shanghai against the government's stringent Covid restrictions prompted selling,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
Markets appeared volatile ahead of this weekend's OPEC+ meeting and a looming G7 price cap on Russian oil.
Although most of the world has lifted most restrictions, China has maintained President Xi Jinping's zero-Covid policy.
Hundreds of protesters and police officers clashed in Shanghai on Sunday night, as protests over the restrictions erupted for the third day and spread to several cities.
The Organisation of Petroleum Exporting Countries (OPEC) and its allies, including Russia, will meet on 4 December. OPEC+ agreed in October to reduce its output target by 2 million barrels per day through 2023.
Meanwhile, diplomats from the Group of Seven (G7) and the European Union have been discussing a price cap on Russian oil of between USD 65 and USD 70 per barrel, with the goal of limiting revenue to fund Moscow's military offensive in Ukraine while not disrupting global oil markets.
However, EU governments were divided on how much to cap Russian oil prices, with the impact potentially being muted.
“Talks on a price cap will continue, but it appears that it will not be as strict as first thought, to the point where it may be borderline pointless,” said Craig Erlam, senior markets analyst at OANDA.
The threat to Russian output from a USD 70 cap, for example, is minimal given that it is already selling at those levels.
The price cap is set to go into effect on 5 December, the same day the EU ban on Russian crude goes into effect.