Oil prices fall as China imposes largest lockdown in Shanghai

Beijing: Global oil prices have fallen as a nine-day Covid-19 lockdown came into force in Shanghai Monday, the largest in China since the onset of the pandemic more than two years ago, the BBC reported.

While Brent crude lost more than $3 a barrel on concerns that the move would mean that demand for oil will fall, the Shanghai Composite stock index fell in early trade before regaining most of the losses later in the morning.

Until now, Chinese authorities had resisted locking down the city of almost 25 million people to avoid destabilising the world’s second largest economy.

Amid a fresh Covid-19 resurgence for nearly a month, the lockdown will be imposed in two phases.

From 5 a.m. March 28 to 5 am April 1, temporary closed-off management will be enforced in regions lying to the east and south of the Huangpu River, including Pudong and its adjacent areas, to carry out nucleic acid testing, Xinhua news agency quoted the city’s Covid-19 prevention and control office as saying.

Then from 3 am April 1 to 3 am April 5, similar temporary closed-off management and testing will be launched mainly in urban districts west of the Huangpu River.

Stephen Innes, managing partner at SPI Asset Management said in a note to investors that there were expectations of further supply chain disruptions as well as a fall in demand, the BBC reported.

“We might be only dealing with the tip of the iceberg,” he said.

In affected areas, closed-off management will take place in residential communities and residents will be required to stay indoors, while non-contact delivery of necessities will be allowed.

Besides, all enterprises, except those necessary for ensuring the people’s daily needs and the city’s operation, will run under closed-off management or have their employees work from home.

Meanwhile, services including bus, subway, ferry, taxi and online ride-hailing will be suspended in the areas under closed management.

Last week, the Shanghai Disney Resort said it would close until further notice, citing the “current pandemic situation”.

The latest measure in Shanghai comes after the entire Jilin province and the technology hub of Shenzhen were placed under lockdowns earlier this month due to a spike in local Covid cases.

As of Monday, China’s overall Covid-19 caseload and death toll stood at 1,274,104 and 11,890.