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Brent crude futures fell $1.29, or 1.2%, to $105.73 at 0900 GMT,
after climbing 2.3% on Friday. U.S. West Texas Intermediate (WTI)
crude futures declined by $1.78, or 1.7%, to $103.01, paring a
2% gain from Friday.
The market was rattled by news that China had discovered its
first case of a highly transmissible Omicron subvariant in
Shanghai and that new cases had jumped to 63 in the country's
largest city from 52 a day earlier.
"The market's just responding to news flow and China has grabbed
the most attention so far," said Commonwealth Bank commodities
analyst Vivek Dhar.
Traders were nervous that the discovery of the new subvariant
and the highest number of daily new cases in Shanghai since May
could lead to another round of mass testing, which would hurt
fuel demand, he said..
"Net long positions in WTI crude futures are now at their lowest
level since March 2020, when demand collapsed amid the initial
outbreak of COVID-19. This is despite ongoing signs of
tightness," ANZ Research analysts said in a note.
The market remains jittery about plans by Western nations to cap
Russian oil prices, with President Vladimir Putin warning
further sanctions could lead to "catastrophic" consequences in
the global energy market.
Questions also remain about how long more crude will flow from
Kazakhstan via the Caspian Pipeline Consortium (CPC). Supply has
continued so far on the pipeline, which carries about 1% of
global oil, even after it was ordered by a Russian court last
week to suspend operations.
(Additional reporting by Sonali Paul; Editing by Bradley Perrett,
Christopher Cushing and Louise Heavens)
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