Oil prices dropped on Tuesday as new COVID-19 restrictions in China, the world’s biggest oil importer, and concerns about a global economic downturn impacted the outlook for fuel demand.

Brent crude futures for September delivery declined $1.47, or 1.4%, to $105.63 a barrel, while West Texas Intermediate crude for August delivery fell $1.59, or 1.5%, to $102.50 a barrel.

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“Growing fears of a recession and continued sluggish demand in China is pulling oil prices lower, though the current supply-demand balances remain precarious,” analysts from consultancy Eurasia Group said.

As the highly infectious BA.5.2.1 subvariant has been found in the country, several Chinese towns are implementing new COVID-19 restrictions, ranging from business halts to lockdowns, to prevent new infections, according to Reuters.

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Meanwhile, Western sanctions on Russia for the Ukraine war, which Russia refers to as a “special military operation,” have affected crude and fuel trade flows.

Other disruptions in energy supply routes from Russia, a key supplier of oil, fuel, and natural gas to Europe, have dealers and utilities worried.

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Concerns over a disruption in the Caspian Pipeline Consortium’s (CPC) system were alleviated Monday after a Russian court overturned an earlier order suspending pipeline operations for 30 days, reported Reuters.

However, traders and experts are still concerned that Russia would shut down the pipeline that carries oil from Kazakhstan to the Black Sea, possibly affecting 1% of world crude supplies.

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Furthermore, spare capacity at the Organization of Petroleum Exporting Countries is running short, with the majority of producers pumping at full capacity.

US President Joe Biden will make the case for increased OPEC oil output when he meets Gulf leaders in Saudi Arabia this week, White House national security advisor Jake Sullivan said on Monday.