Global oil prices have fallen as China starts to implement a city-wide lockdown in Shanghai, an important financial and manufacturing hub.
Brent crude lost more than $ 3 a barrel on concerns that the move would mean that demand for oil would fall as China starts to implement a city-wide lockdown in Shanghai.
The Shanghai Composite stock index fell in early trade before regaining most of the losses later in the morning.
The lockdown, which began on Monday, is China’s largest since the coronavirus outbreak began more than two years ago.
Until now, Chinese authorities had resisted locking down the city of almost 25 million people to avoid destabilizing the world’s second-largest economy.
The city will be locked down in two stages over nine days while authorities carry out Covid-19 testing.
The key financial center has battled a new wave of infections for nearly a month, although case numbers are not high by some international standards.
It comes after lockdowns in China affected tens of millions of people across the country earlier this month, including the entire Jilin province and the technology hub of Shenzhen.
The futures contract for Brent crude – an international benchmark for oil prices – was down by 2.8% at 117.30 in late morning trade.
Traders were concerned about the effectiveness of China’s zero-tolerance policy towards Covid, said Stephen Innes, managing partner at SPI Asset Management.
Mr Innes also said in a note to investors that there were expectations of further supply chain disruptions as well as a fall in demand.
“We might be just dealing with the tip of the iceberg,” he said.
