Oil prices a tad high on lifting of lockdowns in China

Market


NEW DELHI: Global crude oil prices rose marginally on Monday on the back of the lifting of covid-induced lockdowns in major Chinese cities.

At 1138 am, the November Brent contract on the Intercontinental Exchange traded at $91.71 per barrel, up 0.39% from its previous close. The October contract of West Texas Intermediate (WTI) rose 0.15% to $85.24 a barrel.

China is among the largest importers of crude oil globally, and mobility restrictions in the country had raised demand concerns. The Chinese city of Chengdu, which was the biggest city to face Covid lockdowns after Shanghai earlier this year, is set to lower restrictions to a two-week lockdown from Monday.

Oil prices have largely been subdued of late due to restrictions in China and concerns of rate hikes by central banks including the US Federal Reserve.

Sriram Iyer, senior research analyst at Reliance Securities, said that spillage at Iraq’s Basrah oil terminal also supported prices.

“However, upside was capped on fears that hefty interest rate increases will curb global economic growth and demand for fuel. Moreover, the increasing likelihood of global recession coupled with higher U.S. interest rate expectations weighed on prices last week.”

Analysts said that investors will focus on the meeting of the Federal Open Market Committee of the US Federal Reserve. The FOMC will announce its policy decision on 21 September.

“US Federal Reserve meeting, where the central bank is widely expected to raise rates by 75 basis points and signal more tightening to come. The move is also expected after US inflation data read higher than expected in August, indicating that inflationary pressures in the country are yet to ease,” Iyer said

The rate hike by US Fed is likely to be followed by other key central banks including the European Central Bank, which could impact consumption, and thus demand for crude.

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