TOKYO: Oil prices slipped on Monday alongside equities and weighed down by a strong dollar and demand concerns on the back of continued coronavirus lockdowns in China, the world top oil importer.
Brent crude fell $2.27, or 2 per cent, to $109.86 a barrel by 12:22 GMT. US West Texas Intermediate crude was at $107.10 a barrel, down $2.39, or 2.2 per cent. Both contracts have gained over 40 per cent so far this year.
The dollar hitting a fresh two-decade high made oil more expensive for holders of other currencies.
Global financial markets have been spooked by concerns over interest rate hikes and recession worries as tighter and wider Covid-19 lockdowns in China led to slower export growth in the world's No. 2 economy in April.
"The full extent of Chinese oil demand destruction has yet to be felt," said PVM analyst Stephen Brennock, adding he expected oil demand forecasts from the International Energy Agency and others to be revised down in upcoming data releases.
Crude imports by China fell 4.8 per cent in the first four months compared with last year, but included a nearly 7 per cent rise in April.
In Russia, oil output rose in early May from April and production has stabilised, Deputy Prime Minister Alexander Novak was cited as saying, after output fell in April in the wake of Western sanctions imposed over the Ukraine crisis.
Last week, the European Commission proposed a phased embargo on Russian oil, boosting Brent and WTI prices for the second straight week. However, the proposal requires a unanimous vote among EU members this week, which has yet to transpire.
The EU proposal was followed by a pledge by G7 nations on Sunday to ban or phase out Russian oil imports. Washington also imposed new sanctions.
Japan, part of G7 and one of the world's top five crude importers, will ban Russian crude imports "in principle", Prime Minister Fumio Kishida said, adding this would take time. — AFP
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