Oil prices fell by 3% early on Wednesday, extending Tuesday's 5.5% plunge, after China placed millions of residents on Covid lockdowns and Chinese data showed a weakening economic activity.
As of 7:40 a.m. ET on Wednesday, WTI Crude had dipped below the $90 per barrel mark and traded at $89.06, down by 2.78% on the day. Brent Crude, the international benchmark, had slipped by 3.33% at $95.92.
Oil prices are now headed for a third consecutive month of losses in August and the longest monthly losing streak since 2020.
Oil started Asian trading on Wednesday with gains, but they were wiped out by early morning ET after China imposed fresh neighborhood-wide lockdowns in several cities over newly-found COVID cases. The port city of Dalian and the southern city of Shenzhen returned to lockdowns, while mass testing has been ramped up and travel between cities discouraged. The Chinese "zero Covid" policy weighed on the oil market amid expectations of weaker fuel demand.
In more bearish news out of China, factory activity was below the threshold for growth in August, signaling another month of contraction as Covid-related curbs and a brutal heatwave depressed manufacturing output.
Reassurances from Iraq that oil supply is not and will not be affected by the recent violence in Baghdad calmed traders and further depressed oil prices on Tuesday and Wednesday, although the American Petroleum Institute's (API) report on Tuesday was fairly bullish. API reported a small build in crude oil inventories and a draw of 3.414 million barrels in gasoline for the week ending August 26, compared to the previous week's 268,000-barrel build.
Weighing on oil prices early on Wednesday was also a report from the OPEC+ group's Joint Technical Committee, which lifted its forecast for oil market surplus this year by 100,000 barrels per day (bpd) to 900,000 bpd.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More