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Oil price drops to $112 a barrel as China’s Shanghai reopens factories

Oil price drops to $112 a barrel as China’s Shanghai reopens factories
April 19
11:34 2022

Oil prices, on Tuesday, dropped slightly to $112 a barrel as factories in Shanghai prepared to reopen after a COVID-19 shutdown. 

Brent crude futures, the global oil benchmark, fell 0.77 per cent to $112.5 a barrel at 10.07 GMT+1. 

West Texas Intermediate crude futures also fell 0.93 per cent to $107.76 a barrel. 

The development is coming despite moves by China, the world’s largest oil importer, to reopen manufacturing plants in Shanghai — amid China’s worst outbreak since the start of the COVID-19 pandemic in Wuhan.

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Oil prices, however, are still vulnerable to demand shocks as China continues to impose tough COVID-related curbs.

“For oil prices to take off on a sustainable trajectory, reopening mainland cities is necessary for translating into a sustainable economic rebound that supports oil demand,” Stephen Innes, managing director, told Reuters.  

Jeffrey Halley, an Oando analyst, noted that markets in Asia seemed content to adopt a wait-and-see approach, reluctant to chase rallying prices any higher.

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“China’s growth concerns are capping gains,” Halley added.

On Monday, Libya’s national oil corporation had said “a painful wave of closures” started hitting its facilities, declaring force majeure at Al-Sharara oilfield and other sites.

Nigeria, an oil-rich country, is supposed to benefit from high oil prices if it shored up its export capacity. 

However, oil theft and supply disruptions have kept its production capacity down. 

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In March, oil output dropped to an average of 1.24 million barrels per day (bpd) from 1.25 million in February 2022.

It has affected the country’s ability to wade in as a potential supply for Europe’s energy needs.

Recently, the country dropped its oil benchmark to 1.6 million from 1.8 millionbpd in the face of current global challenges.

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