Oil prices dropped to trade near two-month lows on Monday, having earlier slid by around $1 a barrel, as supply fears receded while concerns over fuel demand from China and U.S. dollar strength weighed on prices.
Brent crude futures for January had slipped 65 cents, or 0.7%, to $86.97 a barrel by 1000 GMT.
U.S. West Texas Intermediate (WTI) crude futures for December were at $79.71 a barrel, down 37 cents or 0.5%, ahead of the contract’s expiry later on Monday. The more active January contract was down 50 cents or 0.6% to $79.61 a barrel.
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Both benchmarks closed Friday at their lowest since Sept. 27, extending losses for a second week, with Brent down 9% and WTI 10% lower.
“Apart from the weakened demand outlook due to China’s COVID curbs, a rebound in the U.S. dollar today is also a bearish factor for oil prices,” said CMC Markets analyst Tina Teng.
“Risk sentiment becomes fragile as all the recent major countries’ economic data point to a recessionary scenario, especially in the UK and euro zone,” she said, adding that hawkish comments from the U.S. Federal Reserve last week also sparked concerns over the U.S. economic outlook.
New COVID case numbers in China remained close to April peaks as the country battles outbreaks nationwide and in major cities. Schools in some districts in the capital Beijing switched to online classes on Monday after officials asked residents to stay home, while the southern city of Guangzhou ordered a five-day lockdown for its most populous district.
The front-month Brent crude futures spread narrowed sharply last week while WTI flipped into contango, reflecting dwindling supply concerns.
Meanwhile expectations of further interest rate rises elsewhere have elevated the greenback, making dollar-denominated commodities more expensive for investors.