Brent oil: Disputes in China are increasing, the price of a barrel plunges to the lowest in a year

(BFM Bourse) – Oil prices fell sharply on Monday, investors worried about the rise in coronavirus contaminations in China and the growing demonstrations in the country against the government’s zero-Covid policy.

Black gold prices see red on Monday. Oil futures fall as investors worry about the worsening health and economic situation in China, which is expected to be amplified by the country’s unprecedented wave of popular protest against Beijing’s zero-Covid-19 policy .

The barrel of Brent from the North Sea for delivery in January dropped 2.7% to 81.44 dollars a barrel around 9:50 a.m., a level which had not been reached since the end of December 2021. WTI listed in New York for the same maturity fell 2.7% to $74.25 a barrel, again falling to its lowest since December 2021.

Record number of cases

“Oil prices continue to suffer for this first session of the week, as investors worry about the Covid-related problems emerging in China,” summarizes Naeem Aslam, market analyst at AvaTrade.

The number of daily cases of coronavirus contamination in China continues to increase, having reached more than 40,000 on Monday, a new record, even though the vast majority of these cases remain asymptomatic.

Faced with the very significant restrictions that are in place in the country, hundreds of people demonstrated in several Chinese cities to express their dissatisfaction and demand more political freedoms, which remains extremely rare in the country.

“The situation in China seems to be deteriorating following the new sharp rise in contagion and the ‘revolt’ which is gaining ground against the government’s zero-tolerance strategy”, underlines Sebastian Paris Horvitz of La Banque Postale Asset Management.

“The epidemic situation is likely to continue to deteriorate and further slow the economic recovery. The protest that is developing could deteriorate the situation if it were to spread, and surely continue to negatively affect market sentiment”, develops- he.

Oil tanker stocks in the hard

“Sentiment in the oil market remains negative, and the weekend’s developments in China will certainly not help,” said Warren Patterson, head of commodity strategy at ING Groep NV in Singapore, quoted by Bloomberg.

The demonstrations coupled with the rise in coronavirus cases also have repercussions on the mobility of the Chinese and therefore ultimately on the demand for black gold. According to data compiled by Baidu, road traffic fell by 45% in Beijing on Monday morning compared to the same day in 2021, and by 35% in Guangzhou.

In the wake of the fall in oil, the values ​​linked to the price of black gold are falling. On the Paris Stock Exchange, Vallourec dropped 2.5%, CGG fell 1.7% and TotalEnergies lost 2%. In London, BP and Royal Dutch Shell lost more than 2%.

Julien Marion – ©2022 BFM Bourse

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