(Investing.com) – Oil was down on Monday morning in Asia as investors are concerned that the resumption of stringent COVID-19 curbs such as partial lockdowns in Shanghai may hurt fuel demand.
Brent oil futures fell 1.37% to $120.34 by 11:38 PM ET (3:38 AM GMT) and crude oil WTI futures fell 1.41% to $118.97.
Both benchmarks rose more than 1% last week over robust demand in the U.S. and a potential rebound in China after lockdown measures were lifted from June 1.
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But a flare-up of COVID-19 cases in Beijing has led to the city's most populous district of Chaoyang announcing on Sunday three rounds of mass testing, adding to worries about the uncertain outlook for oil demand.
The sharp rise in U.S. inflation data and concerns of an intensified monetary tightening are also weighing on the market, the U.S. consumer price index released Friday rose 8.6% in May year-on-year, a fresh 40-year high.
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“The stronger greenback and stagflation fears proved to be the bullish market’s undoing,” Stephen Innes of SPI Asset Management said in a note.
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"China remains the significant near-term downside risk, but most view the gradual normalization of Chinese demand as a powerful positive for oil despite the potential for lockdown noise in the coming weeks as current demand is far from reflecting normal conditions."
Saudi Arabia, the world’s top exporter, planned to divert some crude to Europe from China in July to boost supplies in the West, according to Reuters.