The drop in oil due to the Shanghai lockdown has come to the fore, bypassing Ukraine’s martial law with Russia

Despite hostilities in Ukraine and the EU considering a ban on Russian oil to reduce supply, growth fears have not materialized as the strictest lockdown in China, the world’s largest oil importer, has come to the fore, driving the price down.

Oil benchmark Brent and WTI on Friday recorded the third weekly decline in 4 years due to the subsidence of the economy of multimillion-dollar Chinese cities and higher interest rates.

April may be the first month without price growth for Brent this year, if the downward trend continues until the end of April.

London Brent oil became cheaper by 1.6%, reaching $106.65 per barrel. Over the week, the price of Brent fell 4.5% after rising almost 9% last week.

Quotations of WTI at the auctions in New York decreased by 1.7%, having reached 102.07 dollars. Like Brent, WTI posted a 4.5% drop for the week and similar fluctuations over the past three weeks.

Last month, global benchmark Brent hit $139 a barrel, its biggest gain since 2008, but both oil benchmarks are down almost 5% this week due to a significant decline in demand.

Craig Erlam, head of research at online trading platform OANDA, said: “The risks are certainly higher given the war in Ukraine and a potential embargo on Russian exports, but restrictions in China and the risk of an economic downturn caused by the Fed are also significant.”

China’s energy industry experts predict a 20% decline in the country’s demand for gasoline and other petroleum products compared to the same period last year. This means a decrease in oil consumption by 1.2 million barrels per day, and therefore will be a record figure since the first lockdown in China in 2020.

Anxious moods dominate among market investors due to the statement by Fed Chairman Jerome Powell this week about a possible rate hike of half a percentage point at a future meeting on May 4-5. This will serve as an incentive for the dollar to jump to a record figure over the past 2 years. A stronger dollar will make oil and other commodities more expensive for holders of other currencies.

Phil Flynn, an energy industry analyst at Price Futures Group in Chicago, said: “Some fear a 50 basis point rate hike will be the first of many and could slow the economy and oil demand. Not only is this a tightening cycle upsetting traders overnight, but also the price of a 50 basis point interest rate hike by September by the European Central Bank. The Bank of Japan, on the other hand, wants to remain dovish, but fears that the course of the US and Europe could force them to change course.”