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Oil slumped over 5 per cent on Monday to its lowest in two weeks on growing worries about the global energy demand outlook due to prolonged COVID-19 lockdowns in Shanghai and potential increases in U.S. interest rates.

Shanghai’s COVID-19 lockdown misery dragged into a fourth week, as orders for mass testing in Beijing’s biggest district sparked fears that the Chinese capital could be destined for a similar fate.

“Shanghai shows no signs of letting up its strict zero-COVID policy; instead vowing to step up the enforcement of COVID restrictions, which could hurt oil demand further,” said City Index analyst Fiona Cincotta.

China is the world’s biggest oil importer.

Brent futures fell $5.88, or 5.5 per cent, to $100.77 a barrel by 2:03 p.m. EDT (1803 GMT), while U.S. West Texas Intermediate (WTI) crude fell $5.11, or 5.0 per cent, to $96.96.

Both benchmarks were on track for their lowest closes since April 11 after losing nearly 5 per cent last week. Since soaring to their highest since 2008 in early March, prices have collapsed by about 25 per cent.

That retreat has prompted U.S. speculators to cut their net long futures and options positions last week on the New York Mercantile (NYMEX) and Intercontinental Exchanges to the lowest since April 2020.

On the NYMEX, open interest in WTI futures fell last week to its lowest since July 2016 while total daily futures volume dropped to its lowest so far this year.

Oil gained support earlier in the year from tight supplies after Russia’s Feb. 24 invasion of Ukraine caused customers to avoid Russian oil due to Western sanctions. But, the market could tighten further if the European Union (EU) bans Russian crude.

The EU is preparing “smart sanctions” against Russian oil imports, according to a report in The Times of London that cited the European Commission’s executive vice president, Valdis Dombrovskis.

Also pressuring oil, the U.S. dollar rose to a two-year high against a basket of other currencies on the likelihood of U.S. interest rate hikes. A strong dollar reflects risk aversion among investors and makes oil more expensive for other currency holders.

U.S. gasoline futures, meanwhile, slid less than crude, putting the gasoline <RBc1-CLc1> crack spread – a measure of refining profit margins – on track to close at its highest since hitting a record in April 2020 when WTI settled in negative territory.

Russia’s NK Rosneft PAO failed to sell oil in a jumbo tender after demanding prepayment in rubles, meaning the country’s top oil company must find ways to divert more crude to Asian buyers via private deals.

The U.S. Energy Secretary said domestic oil and gas production is rising and will continue to rise to make up for the 1 million to 1.5 million barrels of oil per day that has been pulled off the market in the wake of Russia’s invasion of Ukraine.

A shipping unit of France’s TotalEnergies SE has provisionally chartered a tanker to load Abu Dhabi crude in early May for Europe, the first such shipment in two years.

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