By Yasin Ebrahim
Investing.com – Oil prices started the week on the back foot Monday, as Covid-19 lockdowns in China dimmed the outlook for demand at a time when IEA member countries and the U.S. are set to release millions of barrels of oil.
On the New York Mercantile Exchange crude futures fell 4.04% to settle at $94.29 a barrel, while on London's Intercontinental Exchange (NYSE:ICE), Brent slipped 4.2% cents to trade at $98.49 a barrel.
The lockdown in China has hurt travel activity in the world's second largest economy, putting jet-fuel and broader oil demand in a chokehold. "[I]t is not only in the metropolis of Shanghai that air traffic has been slashed to 10% of its usual level – many long-distance flights have also been cancelled at other places around the country," Commerzbank said in a note.
The consulting firm FGE forecasts the impact of declining transport demand in a range of 1.2 million to 1.3 million barrels per day in total, with jet fuel demand accounting for half of this figure, {{Commerzbank added.}}
There appears to reprieve on the horizon, however, after Shanghai authorities said they would start easing lockdowns in some areas on Monday. The news comes even as China's financial hub reported a record of more than 25,000 new Covid cases on Sunday.
The hit to the demand comes at a time when excess supply is expected to come online and further pressure oil prices. Member nations of the International Energy Agency agreed last week to release 60 million barrels over the next six months, easing fears of a supply shortage.