Growing protests in China against the government’s zero-Covid policy are pressuring oil prices as they spread across the country, casting doubt over the country’s continued oil demand resilience.
The latest flare-up of infections sparked a wave of protests across the country over the weekend, and by Monday morning, their effect on oil prices was already evident, with WTI falling below $75 per barrel in morning trade in Asia and Brent crude dropping to $81 per barrel for the first time since January as traders rushed to sell.
“On top of growing concerns about weaker fuel demand in China due to a surge in COVID-19 cases, political uncertainty, caused by rare protests over the government’s stringent COVID restrictions in Shanghai, prompted selling,” a Nissan Securities analyst told Channel News Asia.
This effect will likely continue as the protests continue. Protests are not a common occurrence in China, and now reports are saying there are protests in several large cities, although, as CNBC noted, the scale of the unrest remains unclear.
The very fact that people are protesting, however, is enough to cause a surge in volatility in oil markets. And reports about clashes between protesters and the police have only contributed to this.
Channel News Asia reported earlier today that protesters and the police had clashed in Shanghai after three days of protests.
Some analysts believe OPEC+ will need to intervene with a further production cut to prevent prices from falling further.
“Bearish sentiment is growing in the oil market with mounting concerns over demand in China and a lack of clear signs from oil producers to further cut output,” the chief executive of Emori Fund Management, a Japanese asset manager, told CAN.
“Unless OPEC+ agrees on a further reduction of production quota or the United States moves to reload its strategic petroleum reserves, oil prices may be headed further down,” Tetsu Emori also said.
By Irina Slav for Oilprice.com
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