December 6, 2022

Oil falls on Beijing’s Govt-19 warning, inflation worries Reuters

© Reuters. File Image: Oil rigs found on January 21, 2019 at the Vaca Muerta shale oil and gas drilling in the province of Patuakhali, Argentina. REUTERS / Agustin Marcarian / File Photo

By Alex Lawler

LONDON (Reuters) – Oil fell about $ 2 a barrel on Monday in Beijing’s Govt-19 cases, dampening hopes that China’s demand will rise again, while concerns over higher interest rate hikes to contain widespread inflation have added to the pressure.

Beijing’s most populous district, Soyong, announced three rounds of mass tests last week to mitigate the “horrific” COVID-19 eruption. The mass test will run until Wednesday.

0907 GMT was down $ 1.86 or 1.5% at $ 120.15, while US West Texas Intermediate crude was down $ 2.15 or 1.8% at $ 118.52.

“The current fall in prices has been exacerbated by warnings of a ‘cruel’ spread of the govt virus in Beijing, which casts doubt on the immediate demand recovery,” said Thomas Varga, PVM’s oil broker.

Concerns about further rate hikes were heightened by US inflation data on Friday, which showed the US consumer price index rose 8.6% last month and weighed on lower oil prices across financial markets. [MKTS/GLOB]

The data alerted markets that the Federal Reserve could tighten policy in the long run and cause a sharp recession. The central bank’s next policy decision is Wednesday.

Oil prices soared in 2022 as Russia’s invasion of Ukraine increased supply concerns and oil demand recovered from the Kovit locks. Brent reached $ 139, its highest level since March 2008, and both oil levels rose more than 1% last week.

Due to the inefficiency of many manufacturers, sanctions on Russia and the unrest in Libya, production in Libya has almost halved, and supply is tight, unable to fully deliver on the production increase promised by OPEC and its allies.

Jeffrey Haley, of the OANDA brokerage firm, said that “supply / demand remains in favor of dynamic prices”, adding that extended oil sales are not possible “until US markets move into a complete recession and new locks in China.” .