Global crude oil prices continued to slide Monday because of the sudden decreased demand sparked by China’s massive COVID-19 lockdowns, experts said.
The Brent crude index, the worldwide oil benchmark, dropped to $98.93 per barrel Monday morning, falling more than 3.39% overnight. The U.S. WTI index decreased more than 3.75% below $94.30 per barrel Monday.
“We have the re-emergence of Covid in China, which is throwing another spanner into the works when we’re trying to assess what the demand will be,” Richard Gorry, JBC Energy Asia’s managing director, told CNBC. (RELATED: How Biden Raised Gas Prices Without Anyone Noticing)
The oil benchmarks have sharply dropped in recent days as the Chinese government has initiated mass economic coronavirus-related lockdowns affecting the nation’s industrial production, Bloomberg reported, and disrupting the world oil supply chains dependent on Chinese demand.
Shanghai, the country’s financial hub, has implemented some of the harshest coronavirus restrictions since 2020.
“Fears are rising now that if China’s Omicron wave spreads to other cities, its zero-COVID policy will see mass extended lockdowns that negatively impact both industrial output and domestic consumption,” OANDA senior market analyst Jeffrey Halley told Reuters on Monday.
China surpassed the U.S. as the world’s largest importer of crude oil when it imported 8.4 million barrels a day in 2017, according to the Energy Information Administration. The nation imported 10.3 million barrels of crude per day in 2021, S&P Global data showed.
Nearly 500 cargo ships are waiting outside east China’s posts after Shanghai’s city-wide lockdown https://t.co/shnwCBlm7H
— Bloomberg (@business) April 11, 2022
By comparison, the U.S. imported 6.1 million barrels of crude oil per day last year.
“There was some hope that China this time around would not go through a lockdown, but the message from the country is that that’s out of the question,” J.P. Morgan head of global commodities research Natasha Kaneva told The Wall Street Journal in late March. “I think the market is definitely afraid of what is coming next.”
Since then, U.S. oil prices have declined more than 11% and global oil prices have dropped 12%, according to marketplace figures. (RELATED: Biden Plans To Release More Oil From Emergency Stockpile. Will It Work?)
President Joe Biden ordered the Department of Energy to release a whopping 180 million barrels of oil over the next six months on March 31. The International Energy Agency coordinated a separate release of 62.7 million barrels of oil among its 31 member nations.
“It’s not a ‘strategic price reserve.’ It was never intended for this and it won’t do anything, just like the last one,” Institute for Energy Research President Tom Pyle told the Daily Caller News Foundation after Biden unveiled the action.
The White House didn’t immediately respond to a request for comment from the DCNF.
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