Oil prices fall after Shanghai locks down

After months of rising oil prices the cost of the commodity has finally started to fall after the Chinese city of Shanghai goes into another full Covid-19 lock down.

The city, an important financial and industrial hub is a major user of oil, with its population of more than 25 million people and large number of manufacturing businesses.

Brent crude, the wholesale price for oil, lost more than $4 (3.65 euros) a barrel on Monday March 28 on concerns that the move would mean that demand for oil will drop.

Despite the fall in the price of Brent crude it is not expected to provide much relief with the price still 80 percent up on 2021, with the war in Ukraine still hanging heavily over world supply.

Similar falls were experienced on the Shanghai stock exchange where the composite stock index fell in early trade. Stocks have since regained most of the losses.

The lockdown, which began on Monday, is China’s largest since the coronavirus outbreak began more than two years ago and is in line with the country’s zero policy. China has unlike most other countries worked to eradicate the virus by locking whole cities and areas down as soon as there is any indication that the virus has taken hold.

Chinese authorities had resisted locking down the city to avoid destabilising the world’s second largest economy. The city having has battled a new wave of infections for nearly a month without slowing the spread, as a result authorities decided to act with the city to be locked down in two stages over nine days while authorities carry out Covid-19 testing.

The east side of Shanghai, the financial sector, went into lock down today while the western side will follow in the coming days.

Public transport in the city has been suspended and firms and factories in the city have been ordered to halt operations or work remotely.

The lockdown will take place in two stages, starting on Monday with the eastern side of Shanghai, which includes the city’s financial centre.

It is not known how long the Shanghai lock down will be in place or whether oil prices will continue to fall or whether they are likely to recover in the short term.

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