Oil prices dropped on Monday as a result of worries that expanding COVID-19 restrictions in China will reduce demand, countering indications that production at the largest U.S. shale field is slowing down. After falling 1.2% on Friday, Brent crude futures were down 36 cents, or 0.4%, to $95.41 a barrel.
After closing Friday’s trading session down 1.3%, U.S. West Texas Intermediate (WTI) oil was trading at $87.67 per barrel, down 23 cents, or 0.3%. Wider COVID restrictions in China typically cause concerns about demand from the top petroleum importer in the world, according to Stephen Innes of SPI Asset Management. As outbreaks increased, Chinese localities strengthened their commitment to Beijing’s zero-COVID policy, dashed earlier expectations of a demand recovery.
WTI is still supported, however, by signs from significant U.S. producers that the Permian Basin, the country’s main shale resource, is slowing down in terms of productivity and volume growth. The warnings were issued as U.S. oil shipments reached record levels last week, which helped to drive up WTI prices by 3.4%. Last week, Brent saw a 2.4% increase, marking its second straight weekly gain.
Separately, People’s Bank of China Governor Yi Gang stated on Sunday that the country’s central bank would continue to pursue its current policy goals of maintaining a credit environment that is sufficiently adequate and strengthening support for the real economy. Two OPEC sources indicated that despite expanding usage of renewable energy and electric vehicles, the Organization of the Petroleum Exporting Countries is expected to maintain its stance that oil consumption will continue to rise for another ten years in its upcoming outlook. Meanwhile, calls for windfall taxes have been resurrected in response to enormous earnings at international energy giants like Exxon Mobil Corp. and Chevron Corp.