Oil slumps as Shanghai lockdown exacerbates fear of weaker demand

Oil prices tumbled more than $5 on Monday as fears over weaker fuel demand in China grew after financial hub Shanghai launched a two-stage lockdown to contain a surge in COVID-19 infections.

According to Reuters, the market kicked off another week of uncertainty, buffeted on one side by the war between Ukraine and Russia, the world’s second-largest crude exporter, and expansion of COVID-related lockdowns in China, the largest crude importer globally.

Brent crude futures slid as low as $115.32 a barrel and were trading down $5.15, or 4.3%, at $115.50 at 0731 GMT.

U.S. West Texas Intermediate (WTI) crude futures hit a low of $108.28 a barrel, and were down $5.30, or 4.7%, at $108.60.

Both benchmark contracts rose 1.4% on Friday, notching their first weekly gains in three weeks, with Brent surging 11.8% and WTI climbing 8.8%.

“Shanghai’s lockdown prompted a fresh sell-off from disappointed investors as they expected such a lockdown would be avoided,” said Kazuhiko Saito, chief analyst at Fujitomi Securities.

Shanghai launched a two-stage lockdown of the city of 26 million people on Monday, closing bridges and tunnels, and restricting highway traffic to contain surging local COVID-19 cases.