On demand worries, oil is in a see-saw mode and drops below $100 per barrel

On Monday, oil prices dropped $1 in early Asian trading to trade below $100 a barrel, erasing gains from Friday.

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Oil prices decreased $1 in early Asian trading on Monday to trade below $100 per barrel, erasing gains made on Friday as focus shifted back to the escalating COVID-19 cases in China and the potential for lockdowns to once more reduce gasoline demand in the world’s biggest oil importing country.

After rising 1.9% on Friday, US West Texas Intermediate (WTI) oil futures for August delivery fell $1.54, or 1.6%, to $96.05 a barrel at 00:55 GMT.

The price of Brent oil futures for September settlement dropped $1.47, or 1.5%, to $99.69 a barrel, erasing a 2.1% gain from the previous day.

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China, the second-largest consumer of oil in the world, recorded 691 new COVID cases for Saturday on Sunday, up from 547 the day before, with domestically transmitted cases reaching their highest level since May 23.

“Oil is opening the week softer as the market digests the demand impact of the rise in new COVID cases in China and as the market cautiously awaits the monumental event risk if Nord Stream 1 gas flow from Russia to Europe will resume later this week,” said Stephen Innes, managing partner at SPI Asset Management.

The largest pipeline bringing Russian natural gas to Germany, known as Nord Stream 1, started its yearly repair on July 11 and is scheduled to last for 10 days. Governments, markets, and businesses worry that the shutdown would last longer due to the conflict in Ukraine.

Germany, the fourth-largest economy in the world, would be severely impacted by the loss of that gas, increasing the risk of a recession.

As was to be expected, US President Joe Biden’s visit to Saudi Arabia produced no commitment to increase oil production from the top OPEC producer. Prior to Biden’s meetings with Saudi Crown Prince Mohammed bin Salman last Friday, the anticipation that there wouldn’t be any additional oil helped drive up prices.

To help control oil prices and lower inflation, Biden wants Gulf oil companies to increase output.

The trip would lead to oil producers taking “a few more steps” in terms of supply, according to Amos Hochstein, a senior US State Department adviser for energy security, who said as much on CBS’ Face the Nation on Sunday. He did not specify which country or countries would increase output, though.

As their current output agreement ends in September, the Organization of the Petroleum Exporting Countries (OPEC) and allies, notably Russia, will be widely observed at their upcoming meeting on August 3.