China has adopted a zero-tolerance against Covid in the attempt to eradicate the virus, leading to nationwide lockdowns.
With companies halting production, oil and metal prices across the world have been impacted as China is one of the major importers.
Oil prices took a 3.5% hit to $116 per barrel for Brent Crude as China announced its lockdown in Shanghai for Covid testing.
China has seen a surge in cases over the last few weeks, and the country has changed their approach in an attempt to safeguard the country against another wave of the pandemic.
The country earlier today announced shutting down Shanghai, China’s largest city, to conduct two-phased testing for Covid. China is dividing Shanghai into two parts, east and west and will test the city for Covid over a span of 5 days each.
Shanghai’s shutdown down has impacted oil prices, as investors are wary regarding reduction in production and decline in imports.
Susannah Streeter, Senior Investment and Markets Analyst, Hargreaves Lansdown said, “China’s zero tolerance covid strategy is causing fresh nervousness about supply chain issues and a slowdown for some sectors with the Shanghai shutdown prompting a fall in the oil price.”
“A barrel of Brent crude dipped by around 3% after tough restrictions were put on the financial and manufacturing hub.”
“25 million people are facing lockdown in two stages, while mass testing is carried out, with factories ordered to shut down and working from home orders imposed.”