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Beijing's most populous district Chaoyang announced three rounds
of mass testing to quell a "ferocious" COVID-19 outbreak that
emerged last week. Mass testing would take place until
Wednesday.
Brent crude was down $1.86, or 1.5%, to $120.15 at 0907 GMT,
while U.S. West Texas Intermediate crude was down $2.15, or
1.8%, at $118.52.
"The present price fall is exacerbated by warnings of a
'ferocious' spread of the COVID virus in Beijing by officials,
casting doubt on immediate demand recovery," said Tamas Varga of
oil broker PVM.
Concern about further rate hikes, heightened by Friday's U.S.
inflation data showing the U.S. consumer price index rose 8.6%
last month, also pushed oil lower and weighed across financial
markets. [MKTS/GLOB]
The data put markets on alert that the Federal Reserve may
tighten policy for too long and cause a sharp slowdown. The next
Fed policy decision is on Wednesday.
Oil has surged in 2022 as Russia's invasion of Ukraine
compounded supply concerns and as oil demand recovered from
COVID lockdowns. Brent hit $139, the highest since 2008, in
March, and both oil benchmarks rose more than 1% last week.
Supply remains tight, with OPEC and its allies unable to deliver
in full on pledged output increases because of a lack of
capacity in many producers, sanctions on Russia, and output in
Libya roughly halved by unrest.
"The supply/demand dynamics remain supportive of prices," said
Jeffery Halley of brokerage OANDA, who sees an extended oil
sell-off as unlikely "unless U.S. markets move to price in a
full-blown recession" and there are new lockdowns in China.
(Additional reporting by Florence Tan and Mohi Narayan; Editing
by Mark Potter)
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