Oil Prices Begin the Week Lower as Fears of a Chinese Covid Lockdown Fuel Demand Concerns

On the New York Mercantile Exchange, oil futures declined 4.04 percent to close at $94.29 a barrel, while Brent crude futures slid 4.2 percent to trade at $98.49 a barrel on the London's Intercontinental Exchange (NYSE:ICE).

China's travel ban has harmed travel activities in the world's second biggest economy, placing a squeeze on jet fuel and crude oil consumption. "Air traffic has been reduced to 10% of its normal level not just in Shanghai, but also in other parts of the nation," Commerzbank stated in a note.

According to Commerzbank, the effect of decreased transport demand is estimated to be between 1.2 million and 1.3 million barrels per day, with jet fuel consumption accounting for around half of this amount.

However, there looks to be some relief on the horizon, as Shanghai officials said Monday that they will begin relaxing lockdowns in certain neighborhoods. The announcement comes after China's financial capital recorded a record number of new Covid cases on Sunday, exceeding 25,000.

Demand is being slashed at a time when extra production is scheduled to come online, putting more downward pressure on oil prices. The International Energy Agency's member states agreed last week to release 60 million barrels over the next six months, assuaging concerns about a supply crisis.