Oil drops on fears of inflation, China’s COVID flare up

With US inflation accelerating to a 40-year high and China imposing new curbs, investors questioned economic recovery

Oil dropped more than $2 on Monday as a flare-up in COVID-19 cases in Beijing dented hopes of a pick-up in Chinese demand, while worries about more interest rate hikes to control rampant inflation have added further pressure, Qazet.az reports.

West Texas Intermediate futures fell nearly 2 percent to trade below $119 a barrel amid a broader market selloff.

US inflation accelerated to a new 40-year high last month, raising the likelihood of more aggressive interest-rate hikes from the Federal Reserve.

China is starting to re-impose virus curbs as cases rise, just weeks after major easing in key cities such as Shanghai. Beijing’s most populous district Chaoyang announced three rounds of mass testing to quell a “ferocious” COVID-19 outbreak.

“The present price fall is exacerbated by warnings of a ‘ferocious’ spread of the COVID virus in Beijing by officials, casting doubt on immediate demand recovery,” said Tamas Varga of oil broker PVM.