Oil declines over demand fears as China applies lockdowns

Oil fell on Friday as a result of new pandemic restrictions in China, while looming EU sanctions on Russian oil exports weighed on market sentiment, limiting further price losses.

International benchmark Brent crude traded at $93.81 per barrel at 10.10 a.m. local time (0710 GMT) for a 1.29% decrease from the closing price of $95.04 a barrel in the previous trading session.

American benchmark West Texas Intermediate (WTI) traded at $87.64 per barrel at the same time for a 1.62% loss after the previous session closed at $89.08 a barrel.

Several cities, including Wuhan in China, the world's second-largest oil-consuming country, have been placed under lockdown as part of the country's zero-covid policy.

Restrictions include locking down more than 800,000 people in one district in Wuhan until Oct. 30. It comes as China recorded more than 1,000 cases for the third day in a row. The fresh measures also apply to Zhengzhou, home to the world's largest iPhone manufacturing plant.

On Thursday, the European Central Bank hiked rates by 75 basis points, its third major consecutive increase to tackle record eurozone inflation, triggering fears that the global recession will reduce oil demand.

"Inflation remains far too high and will stay above the target for an extended period," the bank was quoted as saying in a statement.

In September, euro area inflation hit 9.9%, with soaring energy and food prices, supply bottlenecks and the post-pandemic demand recovery causing price pressures.

Prices were suppressed further after an unexpected build in the US crude oil stockpiles.

US commercial crude oil inventories far exceeded expectations with a rise of 2.6 million barrels to 439.9 million barrels during the week ending Oct. 21 against the market expectation of around a 200,000-barrel rise, according to data released by the Energy Information Administration on Wednesday.

Meanwhile, record-high US crude exports limited the drop in oil prices. Crude oil exports rose by around 991,000 barrels per day (bpd) to 5.12 million bpd last week.

Investor concerns over a lack of supplies, on the other hand, limited losses as EU nations prepare to sanction Russian oil exports in response to the latter's assault on Ukraine.