Economy 2 MIN READ

Oil prices rebound from sharp drop on China demand concerns

April 26, 2022By Reuters

Oil prices opened slightly higher on Tuesday, after falling sharply the prior session on worries that continued COVID-19 lockdowns in China would eat into demand and as the U.S. dollar rose to a two-year high.

Brent crude futures were at USD 102.57, up 25 cents, or 0.2% and U.S. West Texas Intermediate CLc1 contracts climbed to USD 98.70, up 16 cents, or 0.2% at 0002 GMT.

Both contracts had settled down around 4% on Monday, with Brent down as much as USD 7 a barrel in the session and WTI dipping roughly USD 6 a barrel.

In China lockdowns to counter COVID in Shanghai have dragged into their fourth week. Meanwhile orders for mass testing, including in Beijing’s largest shopping district, have prompted fears of other Shanghai-style lockdowns.

“The hit from Chinese lockdowns is over a million barrels a day and the testing of 12 districts over the next five days will determine the next major move for crude prices,” wrote Edward Moya, a senior market analyst for OANDA in a note.

The U.S. dollar also hit a two-year high on Monday, making oil more expensive for other currency holders.

“Supply fears are not the primary focus for energy traders, and now you have a surging dollar that is adding extra pressure across all commodities,” OANDA’s Moya said.

(Reporting by Liz Hampton in Denver; Editing by Kenneth Maxwell)

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