Oil prices fall amid China’s COVID curbs, possible rate hikes

Oil prices fell on Monday on forecasts for global fuel demand
overshadowed by China’s COVID-19 restrictions and the potential
for further increases in interest rates in the United States and Europe,
Trend reports with
link to Reuters.

Brent crude futures fell $1.28, or 1.4%, to $91.56 a barrel
by 0330 GMT, after settling 4.1 percent higher on Friday. West Texas in the US
Intermediate crude fell $1.34 to $85.45 a barrel, or 1.5%,
after rising 3.9% in the previous session.

Prices were little changed last week as gains from par
reducing supplies from the Organization of the Petroleum Exporting Countries
(OPEC) and allies, including Russia, a group known as OPEC+ were
offset by continued blockades in China, the world’s largest crude oil producer
importer.

China’s oil demand may contract for the first time in two years
decades this year as Beijing’s Zero COVID policy keeps people level
at home during vacation and reduces fuel consumption.

“The lingering presence of headwinds from China’s renewed virus
restrictions and further slowdown of global economic activities
may still have some reservations about more sustainable growth,”
said Jun Rong Yeap, market strategist at IG.

“The overall negatives seem to outweigh the positives,” said
Yes, the addition of the $85 mark for Brent crude oil prices may be in place
view.

Meanwhile, the European Central Bank and the Federal Reserve are
ready to raise interest rates further to deal with inflation,
which could increase the value of the US dollar against currencies and
made dollar-denominated oil more expensive for investors.

“Demand concerns have focused on the impact of rising interest rates
on Combating Inflation and China’s COVID-Zero Spread Policy,” Commonwealth
Bank of Australia analyst Vivek Dhar wrote in a note.

However, global oil prices may recover towards the end of the year
– supply is expected to tighten further when the European Union is created
the embargo on Russian oil goes into effect on December 5.

The G7 will introduce a price cap on Russian oil to curb it
Russia’s lucrative oil export earnings since its invasion of
Ukraine in February and plans to take measures to ensure that
oil can still flow to developing countries. Moscow calls its actions
in Ukraine “special operation”.

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