Oil prices fell on Monday with the global fuel demand outlook overshadowed by COVID-19 restrictions in China and the potential for further interest rate hikes in the United States and Europe.
Brent crude futures dropped $1.28, to $91.56 a barrel after settling 4.1% higher on Friday.
U.S. West Texas Intermediate crude was down $1.34 at $85.45 a barrel, after a 3.9% gain in the previous session.
Meanwhile, China’s oil demand could contract for the first time in two decades this year as Beijing’s zero-COVID policy keeps people at home during holidays and reduces fuel consumption.
Meanwhile, the European Central Bank and the Federal Reserve are prepared to increase interest rates further to tackle inflation, which could lift the value of U.S. dollar against currencies and make dollar-denominated oil more expensive for investors.
Still, global oil prices may rebound towards the end of the year – supply is expected to tighten further when a European Union embargo on Russian oil take effect on Dec. 5.
The G7 will implement a price cap on Russian oil to limit Russia’s lucrative oil export revenue following its invasion of Ukraine in February, and plans to take measures to ensure that the oil could still flow to emerging nations. Moscow calls its actions in Ukraine “a special operation”.