Oil prices pulled back in the early hours of the Asian trading session on Monday following a report that China, the world’s largest importer of crude oil, is committed to strict COVID-19 restriction rules.
During the weekend, Chinese officials reiterated their commitment to strict COVID-19 policy after reports pointed to rising COVID-19 cases.
“Oil prices dropped sharply as the Chinese officials vowed to stick to the COVID-zero policy while infected cases climbed in China, which may cause more restrictions measures, darkening the demand outlook,” CMC Markets analyst Tina Teng said.
Brent crude oil, against which Nigerian oil is priced, depreciated by $1.20, or 1.2% to $97.37 a barrel at 3:00 am Nigerian time, while the U.S. West Texas Intermediate crude oil lost $1.37 or 1.5% to $90.40 a barrel.
The decline is also partly due to the stronger U.S. dollar that made it impossible for holders of foreign currency to purchase large quantities of the commodity.
“The market is still dealing with signs of weakness in oil demand from already high prices and the weak economic backdrop in developed markets,” ANZ analysts said in a note, adding demand in Europe and the United States have fallen back to 2019 levels.
“We now expect global demand in Q4 2022 to grow by only 0.6 mb/d (millions of barrels per day) from the same quarter last year and to moderate next year.”