May 16, 2022

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Oil drops below $100 a barrel as coronavirus outbreak in China threatens demand

Oil drops below $100 a barrel as coronavirus outbreak in China threatens demand

Oil prices plunged, dropping below $100 a barrel, as China, the world’s largest oil importer, became the world’s largest oil importer. Force new shutdowns To combat the Covid-19 outbreak – moves that could threaten demand.

Oil price swings, which were close to $130 a barrel earlier this month, reverberated in the stock market: Airlines shares rose and oil producers tumbled.

The global benchmark Brent crude fell about 8 percent to about $ 98.87 a barrel, its lowest price since late February. West Texas Intermediate crude, the US benchmark, fell more than 8 percent to $94.43 a barrel. Over the past week, crude oil prices have fallen more than 20 percent, reversing much of the rally that occurred after the Russian invasion of Ukraine. Tens of millions of residents in provinces and cities, including Beijing, Shanghai and Shenzhen, are under lockdown amid the Omicron type coronavirus outbreak.

Travel between cities has been cut off, production lines have stopped, and shopping centers have closed. These measures could hamper global supply chains still struggling to recover from pandemic disruptions, by slowing down key factory and transportation networks. Companies in China, including Foxconn, the Taiwanese electronics company that assembles Apple’s iPhones, have suspended operations in the country.

The new measures have affected the Hang Seng Index in Hong Kong, where many Chinese companies are listed. After falling 5.7 percent on Tuesday, the index is down 10 percent just this week and at its lowest level since February 2016.

Wall Street backfired on Tuesday, as lower energy costs helped lift stock prices. The S&P 500 rose more than 1.5 percent, with the gains led by airlines. American Airlines and United rose more than 8 percent on Tuesday, while JetBlue was up more than 7 percent in early trading.

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Oil producers declined. Chevron and Exxon Mobil are down more than 6 percent, and Valero Energy is down more than 7 percent, making it among the worst-performing companies in the S&P 500.

Gas prices, which have been rising steadily for weeks amid the conflict in Ukraine, also eased slightly on Tuesday. The average gallon of regular gasoline was $4,316, down from a high of $4,325 the day before, according to to data from AAA.

Wall Street has been hit hard this year as threats to the global economy continue to mount. Inflation is rising Fastest pace in 40 yearsThis threatens consumer sentiment, and the sudden rise in oil prices in recent weeks has exacerbated the situation. Tuesday’s rally came after a three-day stretch of losses for the S&P 500 that has left the index down more than 12 percent for the year.

The Federal Reserve began its two-day meeting on Tuesday and is expected to announce on Wednesday that it will raise interest rates by a quarter point, as it begins a campaign to cool the economy.

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Investors were also studying conflicting messages about the conflict between Ukraine and Russia as the fourth round of negotiations between officials of the two countries resumed on Tuesday. Mykhailo Podolak, a Ukrainian representative, said that Russia and Ukraine discussed a cease-fire Withdrawal of troops from Ukrainian territory.

“There is a lot of information that investors are taking in,” said Fiona Cincotta, chief financial markets analyst at Forex.com. Ms Cincotta said investors may be weighing domestic concerns against news from abroad, and view the US as a safer place to invest for now.

“With the spread of Covid in Asia and geopolitical tensions in Europe, America looks like the best bad group right now,” she said.