Oil plunges to its lowest level since December as riots erupt in China against politics “zero Covid” practiced by the Beijing government: focus on the quotations of the WTI contract traded on the New York Nymex which drops more than 3%, slipping to $74.20 a barrel, after plunging to an intraday low of $73.82, the lowest since December 27, 2021.
Brent fell to $81.16 a barrel, its lowest since January 11th. Oil launches SOS demand: the lockdowns imposed by the Chinese authorities are not only continuing to strain the country’s economy, but are also jeopardizing the demand for oil from the world‘s largest crude importer: precisely, China.
Not for nothing, prices are coming off three consecutive weeks of losses. Also weighing down the prices is the decision of investors to take refuge in the US dollar, one of the most important refuge currencies in the world, in a geopolitical context which, with the protests flaring up in China, becomes even more uncertain. In some videos circulated on social networks – the authenticity of which has not yet been verified – protesters can also be seen calling for the resignation of Chinese President Xi Jinping.
Since the start of the pandemic, China’s approach to managing COVID-19 has relied on mass testing and lockdowns to suppress outbreaks, as well as vaccination.
This hurt energy demand and has spurred a build-up of resentment over the restrictions, as other nations opted for reopening.
The joke is that, despite the restrictions, in this month of November the cases of Covid have returned to rise at a record rate.
Oil continues to be caught in the grip of volatility, triggered by several factors, such as the war in Ukraine, the series of aggressive rate hikes by central banks to dampen inflation and China’s relentless attempts to eliminate the Covid-19 with its zero tolerance policy towards the virus.
Oil: Meanwhile, the EU continues to discuss Russia’s price ceiling
As for Europe, EU diplomats remain engaged in talks on capping Russian crude prices, and talks are expected to resume today. However, EU member countries still cannot agree on how rigidly the ceiling on the price of Russian oil set by the Group of Seven should be set.
While Poland and the Baltic nations have opposed the proposed $65-per-barrel limit, arguing it would be too generous to Moscow, transportation nations like Greece favor it to a higher degree. Russia has said it will ban oil sales to anyone who participates in capping.
Against this backdrop, “sentiment in the oil market remains negative and weekend developments in China will certainly not help,” said Warren Patterson, head of commodity strategy at ING Group NV in Singapore.
In addition to China and Europe, operators are also eyeing the US decision to grant super major Chevron Corp. a license to take over oil production in Venezuela, after sanctions halted all drilling activity nearly three years ago. The easing of sanctions comes after Norwegian mediators announced the restart of political talks between President Nicolas Maduro and the opposition over the weekend.