Fear of a containment in Beijing, which could cause demand to fall, sent the price of oil plunging on Tuesday.
Oil prices remained down on Tuesday, after significant losses suffered the day before, still weighed down by fears of general confinement in Beijing, capital of China, as in Shanghai, thus risking destroying demand for black gold. Around 9:30 a.m. GMT (11:30 a.m. in Paris), a barrel of Brent from the North Sea for delivery in June lost 0.76% to 101.54 dollars. The barrel of American West Texas Intermediate (WTI) for delivery the same month yielded 1.00% to 97.53 dollars.
Read alsoOil drops, confinements in China worry
China has been facing an epidemic outbreak since March that affects many provinces to varying degrees. It responds to this with a zero Covid strategy, that is to say mainly by quarantine and massive screening. “These measures do not bode well for oil demand growth in the world’s largest crude oil importer.commented Tamas Varga, from 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.
Metals also down
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 put some (bullish) pressure on the priceHowever, recalls Susannah Streeter, analyst at Hargreaves Lansdown, “as more and more buyers turn away from Russian oil, even if a European embargo on crude oil has not been decided». «The destruction of demand (…) is offset by the shortage of supply triggered by financial boycotts from Russia“, estimates Tamas Varga, Russia being one of the main producers and exporters of rough. For the analyst, thefundamental question” is now “whether the economic devastation caused by the Ukrainian conflict, China’s attitude to the outbreaks of (Covid-19) infections will outweigh the lack of Russian barrels available».
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