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Oil prices erase 2022 gains as China’s protests raise demand concerns

  • WTI hits lowest since December 2021, Brent at lowest since January 2022
  • Clashes in Shanghai as COVID protests flare across China
  • Investors are focusing on the next OPEC+ meeting on December 4

Nov 28 (Reuters) – Oil prices fell near their lowest this year on Monday as street protests against strict COVID-19 curbs in China, the world’s biggest crude importer, raised concerns about the outlook for fuel demand.

Brent crude fell $2.67, or 3.1%, to trade at $80.96 a barrel at 1330 GMT, after plunging more than 3% to $80.61 earlier in the session to its lowest since Jan. 4 .

US West Texas Intermediate (WTI) crude fell $2.09, or 2.7%, to $74.19 after hitting its lowest since December 22 last year at $73.60.

Both benchmarks, which hit 10-month lows last week, have posted three consecutive weekly declines.

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“In addition to growing concerns about weaker fuel demand in China due to a rise in COVID-19 cases, political uncertainty caused by rare protests over the government’s strict COVID restrictions in Shanghai led to selling,” said Hiroyuki Kikukawa, managing director for research in Nissan Securities.

Markets appeared volatile ahead of an OPEC+ meeting this weekend and a looming G7 price cap on Russian oil.

China has stuck to President Xi Jinping’s zero-COVID policy, even as much of the world has lifted most restrictions.

Hundreds of protesters and police clashed in Shanghai on Sunday night as protests over the restrictions flared up for a third day and spread to several cities.

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group known as OPEC+, will meet on December 4. In October, OPEC+ agreed to reduce the production target by 2 million barrels per day until 2023.

Meanwhile, the Group of Seven (G7) and EU diplomats have been discussing a price cap on Russian oil of between $65 and $70 a barrel, aimed at limiting revenues to finance Moscow’s military offensive in Ukraine without disrupting global oil markets.

However, EU governments were divided on the level to cap Russian oil prices, with the impact potentially being muted.

“Talks will continue about a price cap, but it appears that it will not be as strict as first thought, to the point where it could be borderline pointless,” said Craig Erlam, senior market analyst at OANDA

“The threat to Russian production from a ceiling of $70, for example, is minimal, as it is already selling around those levels.”

The price ceiling will come into effect on 5 December, when an EU ban on Russian crude also comes into effect.

Reporting by Noah Browning Additional reporting by Yuka Obayashi in Tokyo and Mohi Narayan in New Delhi Editing by Kirsten Donovan and David Goodman

Our standards: Thomson Reuters Trust Principles.

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