On Monday, oil prices fell to near year lows as street protests against strict COVID-19 curbs in China, the world’s largest crude importer, fueled concerns about the outlook for fuel demand.

Brent crude fell $2.66, or 3.1%, to $80.97 per barrel at 1000 GMT, after falling more than 3% earlier in the session to $80.61, its lowest since January 4.

WTI crude in the United States fell $2.39, or 3.1%, to $73.89 per barrel. It had previously dropped as low as $73.60, its lowest level since December 22, 2021.

Both benchmarks have dropped three weeks in a row after reaching 10-month lows last week.

“On top of growing concerns about weaker fuel demand in China due to a surge in COVID-19 cases, political uncertainty, caused by rare protests over the government’s stringent COVID restrictions in Shanghai, prompted selling,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.

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

Despite the fact that the majority of the world has lifted most restrictions, China has maintained President Xi Jinping’s zero-COVID policy.

Hundreds of protesters and police officers clashed in Shanghai on Sunday night, as protests over the restrictions erupted for the third day and spread to several cities in the aftermath of a deadly fire in the country’s far west.

On December 4, the Organization of Petroleum Exporting Countries (OPEC) and its allies, including Russia, will meet as OPEC+. OPEC+ agreed in October to reduce its output target by 2 million barrels per day through 2023.

Meanwhile, diplomats from the Group of Seven (G7) and the European Union have been discussing a price cap on Russian oil of between $65 and $70 per barrel, with the goal of limiting revenue to fund Moscow’s military offensive in Ukraine while not disrupting global oil markets.

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

“Talks will continue on a price cap but it seems it won’t be as strict as first thought, to the point that it may be borderline pointless,” said Craig Erlam, senior markets analyst at OANDA

“The threat to Russian output from a $70 cap, for example, is minimal given it’s selling around those levels already.”

The price cap is set to go into effect on December 5, the same day that the EU ban on Russian crude goes into effect.

(Adapted from TheGlobeAndMail.com)

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