Oil prices fell more than $5 on Monday, March 28, as concerns over weak fuel demand appeared in China after Shanghai announced a 9-day lockdown to contain a surge in COVID-19 infections.

Brent Crude’s May 2022 contract slid to as low as 108.43 dollars today from the 117.37 dollar settlement price on Friday, March 25.

Energy prices have been volatile amid the Russia-Ukraine war, with spot oil reaching 127 dollars per barrel on March 8. Rystad Energy analysts even estimated that oil could hit 200 dollars a barrel if the sanction on Russian oil escalated.

Shanghai is not just China’s hub for finance and international business but also home to the world’s largest container-shipping port.

The city has entered a two-stage lockdown with 26 million people to curb the pandemic’s spread, which is expected to have a major impact on the national economy.

The measures include orders to work from home and the suspension of public transit and ride-hailing. The city’s 9-day lockdown starts on Monday, March 28.

“This is also prompting growing concerns that China’s strict zero-Covid policy will lead to repeated lockdowns in key business centres,” Commerzbank analyst Carsten Fritsch said.

China has been the global oil demand driver for the last decade. It is the worldwide largest crude importer. Bjarne Schieldrop, a chief analyst of commodities at SEB bank, expected China’s domestic oil demand to be 800,000 barrels per day, softer than usual in April.

According to Andrew Lipow, president of Lipow Oil Associates in Houston, “The fear that the lockdowns could spread combined with a long liquidation has resulted in further decline of the market.”

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