Oil falls more than $1 as a result of China's COVID restrictions

On Monday, the price of oil dropped by more than a $1 as a result of weaker-than-expected manufacturing activity data coming out of China and on fears that China's broadening COVID-19 restrictions may reduce demand. And fears that China's broadening COVID-19 restrictions may reduce demand could affect the global economy in the long run.

Effect on Brent oil futures: After falling 1.2% on Friday, the price of a barrel of Brent oil futures was down $1.10, or 1.2%, to $94.67.

Effect on West Texas Intermediate (WTI): After ending with a loss of 1.3% on Friday, the price of a barrel of West Texas Intermediate (WTI) oil in the United States was $86.83 on Monday.

An official survey released on Monday indicated that manufacturing activity in China, the world's top oil importer, declined sharply in the month of October. This decline was caused on by weakening global demand as well as tight COVID-19 restrictions that impacted output. As the number of outbreaks in China increases, local governments are pressing down on Beijing's zero-COVID policy. This has tempered early predictions of a revival in demand.

In China, strict COVID-19 restrictions have slowed economic and corporate activity, which has in turn reduced the country's need for oil. As a result of Beijing's stringent COVID-19 curbs, China's crude oil imports for the first three quarters of the year decreased by 4.3% when compared to the same period a year earlier. This marks the first annual decline for this period since at least 2014, and it is the first annual decline for this period since at least 2014.

According to a survey conducted by S&P Global, business activity in the euro zone contracted at the quickest pace in over two years in October. This suggests that the region is set to enter a recession, as increasing costs of living continue to make consumers cautious and reduce demand.

Even if it sends the region into recession and stirs up political animosity, officials at the European Central Bank are sticking by their intentions to continue hiking interest rates. On Friday, some of the leading oil producers in the United States gave indications that productivity and volume growth in the Permian Basin, which is the most productive shale field in the country, are levelling out.

The warnings came at the same time as shipments of oil from the United States hit a new high last week, which helped drive WTI prices higher by 3.4%. The price of Brent crude oil increased by 2.4% over the last week, marking the commodity's second weekly advance in a row. Despite the growing use of renewable energy and electric cars, the Organization of the Petroleum Exporting Countries (OPEC) is expected to maintain its view that oil demand will continue to rise for at least another decade, according to two sources within OPEC. This outlook is scheduled to be released on Monday.