Oil Prices Dropped: Concerns About the Economy and China’s Efforts to Combat COVID

Oil prices Dropped as investors considered the possibility that a worldwide downturn may reduce demand and China reported expanding cases of the Covid-19 virus. The price of a barrel of West Texas Intermediate crude oil fell closer to $107 after increasing by 2.5 percent on Friday to complete a weeklong rise. Due to the fact that Monday is a holiday in the United States in observance of the Fourth of July, it is anticipated that trading volumes will be lower than typical on that day.

Oil prices Dropped
A field with oil pump

The price of crude oil was severely impacted last month when a wave of selling in commodities was driven by concerns of an imminent US recession. Despite this, supply disruptions, notably those in Libya, have helped to compensate for some of the downturn. A healthy market is also indicated by key time spreads.

After receiving a lift from the crisis in Ukraine, which provoked a wave of sanctions on Russian shipments, the price of oil has remained more than forty percent higher this year. Many product prices have remained at or near all-time highs, and Vitol Group, the world’s largest independent oil trader, issued a warning over the weekend that rising gasoline prices are beginning to have an adverse effect on demand.

In an interview with Bloomberg Television, Vivek Dhar, an analyst at Commonwealth Bank of Australia who specializes in mining and energy commodities, predicted that there would be an increase in the amount of pressure exerted during the year.

When it comes to energy, “we absolutely anticipate demand destruction playing out by the end of this year,” and as a consequence, prices are going to decline. Although authorities in China seem to have brought prior coronavirus outbreaks in megacities under control, the country’s effort to achieve its objective of Covid-Zero is now being hampered by a new obstacle in its eastern regions. Over the course of the weekend, several hundred local cases were recorded, notably in the province of Anhui.

The oil markets are still exhibiting backwardation, a bullish trend that is characterized by prices for the shorter period fetching a premium over those for the longer term. Backwardation was at $3.77 a barrel for Brent’s prompt spread, which is the difference between its two closest futures. This is more than $1 more than it was a month ago.

The high cost of gasoline presents a difficulty for Vice President Joe Biden of the United States, who has resorted to depleting strategic stockpiles and urging suppliers from the Middle East to increase supply in order to bring prices down. Biden called on firms who operate gas stations to bring down their pricing in a tweet. Jeff Bezos, founder of Amazon.com Inc., voiced his disagreement with the article.

As the Federal Reserve raises interest rates at a quick pace to battle the fastest inflation in decades, there has been an increase in the level of concern over the possibility of a recession in the United States, which would pose a danger to the demand for oil. On Wednesday, the minutes from the meeting of the Central Bank that took place in June are scheduled to be released.

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On July 3, China reported 460 new COVID cases, compared to 473 the previous day.

China reported 460 new COVID cases

Mainland According to information provided by the National Health Commission on Monday, China recorded 460 new instances of coronavirus on July 3, of which only 72 were symptomatic and 388 were asymptomatic. This is a decrease from the previous day’s total of 473 new cases, which included 104 symptomatic and 369 asymptomatic illnesses, each of which China counts independently. There were no further fatalities, therefore the total number of fatalities throughout the country remains at 5,226.

As of Sunday, mainland China has recorded 225,923 instances of people showing signs of the disease. According to the statement made by the local administration, there were not any newly recorded cases in the city of Beijing, which is the capital of China. According to statistics provided by the local government, Shanghai reported two new local symptomatic cases, which is the same number as the day before, and one new local asymptomatic case, which was not recorded the day before.

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