Oil drops on recession fears, China COVID demand

File – Pumpjacks at the Inglewood oil fields in California

SULAIMANI (ESTA) — Oil prices dropped by almost $1 on Tuesday as concerns over a possible recession and China’s COVID-19 curbs outweighed tight global supply.

Brent crude futures fell 30 cents to $113.1 a barrel by 0855 GMT. U.S. West Texas Intermediate (WTI) crude dropped 25 cents to $110.

“Global economic growth is precipitously declining under the collective impact of rising interest rates, Chinese COVID flare-ups and the European war,” Reuters quoted Tamas Varga of oil broker PVM as saying.

Beijing is stepping up quarantine efforts to end its month-old outbreak while Shanghai’s prolonged lockdown is due to be lifted in a little more than a week.

In a step that analysts say will further tighten the market, the European Union is moving closer to agreeing a ban on Russian oil imports, Reuters reported.

Another source of support is U.S. gasoline demand, according to Reuters. This Memorial Day weekend is the traditional start of the U.S. summer driving season, when gasoline demand usually peaks.

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