- Crude oil prices dipped on Monday.
- The prospects of slower economic growth coupled with US interest rate hikes have squeezed the oil demand forecast.
- the US Federal Reserve's aggressive stance on tightening monetary policy has further rattled the financial markets.
After dipping nearly 5% in the last week, crude oil prices tumbled 4% more on Monday to reach their lowest level in two weeks. The significant drop in oil prices is underpinned by growing worries about the global energy demand outlook amid ongoing lockdowns in China, the biggest importer of crude oil in the world.
The prospects of slower economic growth coupled with US interest rate hikes have already squeezed the oil demand forecast. On top of that, the Russia-Ukraine war and ongoing lockdown in various parts of China could further weaken the demand growth in the near term.
The prices of both oil benchmarks tumbled substantially in the last week as the International Monetary Fund (IMF) has its growth forecast blaming rising inflation concerns and ongoing conflict between Russia and Ukraine.
The prices of both crude oil benchmarks reached their lowest level since 11 April and collapsed by nearly 25% since soaring to their highest level since 2008.
On Monday, Brent Crude oil settled at US102.32/bbl, down 4.1% and WTI crude oil settled at US$98.54/bbl, down 3.5%.
Source: Refinitiv Eikon
On Tuesday, July delivery Brent Crude oil futures inched higher and last traded at US$102.45 per barrel up 0.17%, while June delivery WTI crude oil futures exchanged hands at US$98.79 per barrel, up 0.25% at 10:32 AM AEST.
China’s COVID-19 lockdown misery
China’s COVID-19 lockdown misery persisted to the fourth week, with 51 new deaths reported on April 24, the highest one-day toll to date, as per media reports. The worsening infection rate has led to tightening enforcement and subsequently a hard lockdown in Shanghai.
China has imposed lockdowns in several cities as the country pursues a Covid Zero strategy. In Beijing, the government has expanded testing to 12 districts from 26-30 April. China’s oil demand averaged 13.3 Mbpd in March, according to data compiled by Bloomberg.
Adding to this, the US Federal Reserve's aggressive stance on tightening monetary policy, with an expected 50 basis point interest rate hike has further rattled the financial markets and raised the possibility of economic recession.
Moreover, the state-owned National Oil Corp said that Libya's 120,000 bpd Zawiya refinery has been damaged due to armed clashes on 22 April.
Crude oil prices dipped on Monday after falling nearly 5% in the last week due to lower demand from China amid the ongoing lockdown in various parts of the country.
Here’s how commodities performed in the last week click here