Title: Oil falls on Beijing's COVID-19 warning, inflation worries

Jun 13, 2022 04:30AM ET

By: AnalysisiWatch

Oil prices fell more than $2 on Monday as a flare-up of COVID-19 cases in Beijing dampened hopes of a pick-up in Chinese demand, while worries about further interest rate hikes to control rampant inflation added to the pressure.

Beijing's most populous district of Chaoyang announced three rounds of mass testing to combat a "ferocious" COVID-19 outbreak.

Concerns about further interest rate hikes, exacerbated by Friday's US inflation data, weighed on financial markets.

Brent crude fell $2.34, or 1.9%, to $119.67 at 0815 GMT, while US West Texas Intermediate crude fell $2.36, or 2%, to $118.31.

The current price slump is exacerbated by authorities' warnings of a "horrific" spread of the COVID virus in Beijing, casting doubt on an immediate recovery in demand.

Oil prices have soared in 2022 as Russia's incursion into Ukraine heightened supply concerns and oil demand recovered from the COVID lockdown. Brent hit $139 in March, its highest level since 2008, and both oil benchmarks rose more than 1% last week.

Supply remains tight as OPEC and its allies are unable to fully deliver on promised output increases due to a lack of capacity at many producers, sanctions on Russia and a roughly halved output in Libya due to unrest.

Stocks fell in Asia and posted early losses in Europe as data on Friday showing the US consumer price index rose 8.6% last month continued to weigh on financial markets.

The data put markets on alert amid fears that the US Federal Reserve may tighten monetary policy for too long and cause a sharp slowdown in the economy. The Fed's next monetary policy decision is due on Wednesday.