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Oil falls on Beijing’s COVID-19 warning and inflation worries

Oil prices fell more than $2 on Monday as a spike in COVID-19 cases in Beijing dashed hopes of a quick recovery in fuel demand from China, while concerns over the Global inflation and slow economic growth further depressed the market.

Brent crude futures fell $2.3, or 1.89%, to $119.71 a barrel at 0647 GMT, while U.S. West Texas Intermediate crude was at $118.4 a barrel, in down $2.27, or 1.88%.

Prices fell after Chinese authorities warned at the weekend of a “fierce” spread of COVID-19 in the capital, where mass testing is planned until Wednesday.

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“China remains the significant downside risk in the near term, but most view the gradual normalization of Chinese demand as a strong positive for oil,” Stephen Innes of SPI Asset Management said in a note.

This is despite the potential for lockdown noise in the coming weeks, Innes added, with demand still far from reflecting normal conditions.

Both global oil benchmarks rose more than 1% last week after data showed robust oil demand in the world’s biggest consumer, the United States, despite inflation fears.

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Their rise was helped by hopes of a rebound in consumption in the world’s second-biggest consumer, China, after lockdown measures were lifted from June 1.

Worries over further interest rate hikes after Friday’s searing US inflation data are also weighing on global financial markets.

The US consumer price index rose 8.6% last month, its largest annual increase since December 1981, official figures show, dashing hopes that inflation may have peaked.

Read also | Mass COVID-19 testing announced for Beijing’s Chaoyang district amid ‘fierce’ outbreak

“Concerns about slowing economic growth that is dampening global consumption in the coming months and China’s ongoing COVID restrictions weighing on its near-term consumption are dominating market sentiment,” said Vandana Hari, founder of the analytics provider Vanda Insights, in a note.

Oil producers and refiners are running at full speed to meet peak summer demand, while traders are closely monitoring any potential impact of labor disputes in Libya, Norway and South Korea on exports and consumption. of oil.

To boost supplies in the West, Saudi Arabia, the top exporter, plans to divert some crude to Europe from China in July, traders said.

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Post expires at 2:18pm on Thursday June 23rd, 2022