Brent oil futures finished under $100 a barrel on Tuesday, the first time it has closed below that key benchmark level since the second day of Russia’s invasion of Ukraine almost three weeks ago.
Crude futures for delivery in May ended at $99.91 a barrel, down 6.5 per cent.
US benchmark West Texas Intermediate dropped 6.4 per cent to $96.44 a barrel.
The drop came as China placed tens of millions of people under lockdown following the latest surge in Covid-19 cases, raising fresh worries about a hit to oil demand.
Rystad Energy analyst Louise Dickson said severe Chinese restrictions could put 500,000 barrels a day of oil at risk.
“China oil demand risk is real,” Dickson said, adding that a strengthening dollar also pressures crude prices since oil is traded in dollars.
The Federal Reserve is expected to take the first step in a series of interest rate increases on Wednesday, which could push the dollar higher.
Rystad cautioned that the drop in oil prices may be “short lived” given the tight state of global crude inventories and ongoing uncertainty surrounding Russian crude.
Robbie Fraser, an analyst at Schneider Electric, said there were “growing signals” that Russia was struggling to find buyers for crude following condemnation of the country’s invasion of Ukraine.
But high prices also could weigh on consumption, given that in the summer travel season, “gasoline demand tends to be much more responsive to prices, which in many markets already sit at all-time highs,” Fraser said.
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