The lockdown occurred due to the explosion of Covid-19 cases in China had an impact on world oil prices. Most recently, Monday (11/04/2022), world oil prices were observed to have fallen after the previous week’s decline.
The price of Brent oil recorded a correction of 1.76 percent to be at the level of US $ 100.97 per barrel. Meanwhile, light sweet oil, or WTI decreased by 1.75 percent to US$96.54 per barrel.
The cause of the drop in world oil prices today is due to the condition of the Bamboo Curtain Country as one of the largest oil consumers in the world, which is undergoing a total lockdown.
The lockdown in China has resulted in a decline in oil consumption, which has caused concern for oil traders. Apart from the outbreak of Covid-19 in China, America’s efforts to release 1 million barrels of its national oil reserves to increase exports and replace the absence of Russian oil from global trade also contributed to the collapse of oil prices.
China has tightened its lockdown policy due to the outbreak of the Covid-19 infection. The business and economic center of China, Shanghai is the city with the most severe Covid-19 infection rates.
Based on official data from the Chinese government, as many as 26,000 new Covid-19 cases occurred in Shanghai, which was recorded as the largest outbreak experienced by China despite the strict lockdown that has been carried out by the city of 25 million people. Covid-19 cases have increased dramatically from 9,006 cases on April 3.
So far, there is no word on when the lockdown will end, although many residents have complained about the difficulty of accessing food and medicine.
With the lockdown carried out by the Chinese government, the demand for oil in China decreased drastically to 1.2 to 1.3 million barrels of oil per day (BOPD). Data shows that half of the reduced demand for oil comes from the demand for avtur.
Based on data from energy consultancy FGE quoted from Bloomberg, it was noted that before the Covid-19 outbreak hit China, daily oil demand in Panda Country in January and February reached 13.7 million BOPD.
“Shanghai’s total lockdown and the severity of this situation are completely unexpected. Even if the lockdown in Shanghai ends, there is still a risk of losing demand of half a million barrels of oil per day due to possible lockdowns in other cities [in China],” explained an analyst at energy consultancy FGE, quoted by Bloomberg, Monday (11/04/2022).
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