Oil Prices Drop to 2022’s Lowest Level as China Covid Protests Increase

• Crude-oil prices plunged Monday after COVID-19 protests from China.
• Market sentiment was shattered by the fear of unrest in China’s second-largest country, sending shares in Hong Kong ejecting.
• China reported 40,052 new local COVID-19 cases on Monday — a daily record high for the fifth straight day.

Protests against COVID-19 curbs were heard in China early Monday, causing markets to be shaken in Asia. This led to crude oil prices in the US falling to a level not seen this year and Chinese markets tumble.

Ten people were killed in an apartment fire in Xinjiang, China. This led to rare public protests. Many online users blame Covid restrictions for preventing rescue efforts and obstructing escape routes.

The accusations were denied by the authorities. However, anger erupted in China after the three-year-old period of tight pandemic controls.

The fear of unrest in China — and its potential impact on the world’s second-largest economy — hit market sentiment, sending oil prices tumbling. China is also a major oil importer.

Benchmark US West Texas Intermediate crude oil futures were 2.9% lower at $74.09 a barrel at 12.02 a.m. Monday EST — their lowest level this year, while international benchmark Brent crude oil futures tumbled to an 11-month low, trading 2.8% lower at $81.35 a barrel.

At midday, Hong Kong’s Hang Seng Index fell by 2%, while Hang Seng China Enterprises Index dropped 2.2%. The Shanghai Composite fell 1 while the Chinese yuan dropped 0.5% against the US dollar.

“Rising unrest, in China in the shape of protests at several cities, has translated into greater reopening pressure on authorities but any indications for reopening seem unlikely to be guided in view of current record-high cases,” Yeap Jun Rong wrote Monday as a market strategist at online trading platform IG. 

He said that the Chinese markets may remain volatile over the coming week, and any inaction by the authorities to change its Covid-19 policy could be a catalyst for a more downbeat mood.

China reported 40,052 new local COVID-19 cases on Monday — a daily record high for the fifth straight day, according to the country’s National Health Commission. This number also includes asymptomatic patients.