Oil prices on Tuesday dropped slightly today as factories in Shanghai are set to reopen sequel to the COVID-19 shutdown and Libya was forced to halt some exports.
The Brent Crude oil futures dipped by about 3.8 percent from $113.16/barrel it traded for in the previous day, to about $108/barrel as at the time 3.22GMT+1
Similarly, the West intermediate Texas crude futures also fell by about 1.54 percent from $103.85 a barrel it traded for in the previous day to $105.48 a barrel as at 3.22GMT+1.
This is coming after China’s decision to reopen its manufacturing plants in Shanghai amidst the pandemic break out in Wuhan, China, in 2019.
China is the world’s largest importer of oil and oil prices remain vulnerable to the market forces that come to play as China continues to impose tough COVID related rules.
Stephen Innes, Head of Trading and Market Strategy SPI Asset Management has said that, “for oil prices to take off on a sustainable trajectory, reopening of the mainland cities is necessary for translating into a sustainable economic rebound that supports oil demand.
Jeffrey Halley, an analyst at Oando also noted that marketers in Asia seemed reluctant to pursue rallying prices of the oil as they demonstrated contentment by adopting the wait-and-see approach.
Halley also added that, “China’s growth concerns are capping gains”.
However, on Monday, the 18th April 2022, Libya’s national oil corporation had said “a painful wave of closures” started hitting its facilities, declaring force majeure at Al-Sharara oilfield and other sites.
Meanwhile the possibility of a European Union ban on Russian oil for its invasion of Ukraine continues to keep the market on edge. On Tuesday Ukraine said Russia, which calls its actions a “special operation”, had started an anticipated new offensive in the east of the country.
According to ANZ Research analysts, “Market sentiment was supported by the Russian minister saying more countries banning Russian oil imports would mean oil prices exceeding historic highs.”
Shanghai factories has been shut down for about three weeks following China’s COVID restrictions to curb the country’s latest breakout.
However, manufacturers have begun preparing to reopen their factories to bring back production to China’s economic hub.
The lockdown has ground business to a halt in China’s most populous city, while wider curbs are rattling global supply chains and taking a mounting toll on the world’s second-largest economy during a key year.