Oil extends drop as concerns over economic slowdown grip market

Oil fell for a second session as a Covid-19 resurgence in China and concerns about a global economic slowdown hang over the market.

West Texas Intermediate futures lost 1 per cent to trade near $103 a barrel. Bearish sentiment has filtered through commodities as rising virus cases in China and a looming US inflation print stoke concerns about the demand outlook. A rising dollar has added to the pressure, making oil less attractive to investors.

Crude has tumbled since early June on escalating fears of a slowdown as central banks raise rates to combat rampant inflation. President Joe Biden is scheduled to visit Saudi Arabia this week during a tour to the Middle East as he seeks to tame high energy prices that have roiled the global economy.

The US believes OPEC has room to raise production should Biden’s upcoming visit to the Middle East yield any agreements. The president has repeatedly called on the group to pump more, though Saudi Arabia and the UAE are the only members with significant volumes of unused output.

The market has tightened this year, in part due to upended trade flows from Russia. US Energy secretary Jennifer Granholm is set to meet with counterparts from the Quad group of nations during a visit to Sydney, and will use talks to rally support for a cap on Russian oil prices.

Close to 30 million people in China are under some form of movement restrictions as more cities and counties seek to quell resurgent Covid-19 outbreaks. The nation reported 352 new cases for Sunday, with the daily figure hovering over 300 for the past week, the highest level since late May.