Oil prices drop on recession fears, China's COVID restrictions
- Brent crude futures were down 82 cents, or 0.8%, to $106.20
- WTI crude futures in the United States fell $1.04, or 1%, to $103.75
- The Nord Stream 1 pipeline maintenance will take place from July 11 to July 21
Oil prices dipped nearly $1 in choppy trade on Monday, erasing some gains from the prior session, as concerns about a recession and China's COVID-19 restrictions hitting demand outweighed ongoing supply concerns.
Brent crude futures were down 82 cents, or 0.8%, to $106.20 after rising 2.3% on Friday.
WTI crude futures in the United States fell $1.04, or 1%, to $103.75, reversing a 2% gain on Friday.
Last week, both contracts saw weekly falls as the market was driven by concerns that rising interest rates to combat inflation would trigger a recession and limit oil demand.
On Monday, both benchmark contracts first traded down before turning positive, then trading lower again.
The number of COVID-19 cases in China increased over the previous day, according to data for July 10. Concerns have been raised about the possibility of widespread lockdowns following the discovery of a new Omicron subvariant in Shanghai.
President Vladimir Putin has warned that more sanctions might have "catastrophic" repercussions on the global energy market, so the market is still worried about moves by Western countries to restrict Russian oil prices.
The Nord Stream 1 pipeline maintenance, which will take place from July 11 to July 21 and is the largest pipeline transporting Russian gas to Germany, is another important aspect that traders will be keeping an eye on, according to Reuters.
Governments, markets, and enterprises are concerned that the shutdown may be extended owing to the war in Ukraine.
"The big problem for markets right now - forget COVID and Biden headlines - it's going to be whether Nord Stream comes back on again," said Stephen Innes, managing partner at SPI Asset Management.
According to him, if the pipeline is not resumed as planned on July 22, this might result in Europe's gas demand being destroyed, which would cause the region's economy to slow down, weakening demand for oil, and stagflation.
"Until we get clear of that major risk event we'll stay in this loop of good and bad in the oil market," Innes said.
According to Reuters, CPC Blend crude oil exports are expected to increase to 5.45 million tonnes in August, up from 4.86 million tonnes in July.