Analysts believe that the recent Covid wave in China and its subsequent lockdowns helped to lower oil prices from their record-breaking highs of around a week earlier.

Richard Gorry is managing director of JBC Energy Asia.

He stated that the markets continue to struggle with oil disruptions caused by Russia’s-Ukraine War.

Recent sessions have seen oil prices volatile, with crude oil prices reaching record highs of $130 per barrel, which is the highest level since 2008. However, crude oil prices fell dramatically to below $100/barrel earlier in the week.

Gorry explained that “the OPEC’s monthly reports haven’t changed their demand forecast.” It is likely that this trend will shift in the coming months. China has, for instance, 45 million people locked down right now. In 2020, it had only 500,000. This has an effect on oil demand, as we have seen in the past.

China took a hard line in the face of its worst Covid spike since pandemic started. It ordered lockdowns, and other measures. pause in manufacturing in some cities. Manufacturing hub Shenzhen ordered businesses to suspend productionThis affected Apple Supplier Foxconn.

China is the biggest importer of oil in the world. Any reduction in demand for this product would impact energy prices.

Although it’s tempting “it’s tempting” to blame the oil price drop on oil optimism towards an early cessation of hostilitiesAccording to Ray Attrill (head of foreign currency strategy, National Australia Bank), it is more likely that there are a variety of factors in Ukraine.

“[The fall in oil prices] more likely reflects a combination of some speculative froth being blown off, alongside fears of weaker China demand as more Chinese cities are put into lockdown amid record high Covid case numbers — as tiny as these are relative to most other parts of the world,” he wrote in a Wednesday note.

China’s National Health Commission stated Tuesday that recent epidemics have affected more than 15,000 people. The outbreaks are primarily caused by the highly transmissible variant of omicron. according to state media.

Sergei Lavrov (Russia’s foreign minister) indicated that Moscow was willing to allow Iran’s nuclear deal to proceed, which would enable oil supply to resume. According to Reuters reports, talks on reviving the deal had been stalled previously due to Russia’s demands.

Brian Martin, Daniel Hynes and ANZ Research Analysts said that there are “hopes” for a deal with Iran. This would bring stability to the Middle East. It could also shore up oil supplies.

However, Bob McNally (president at Rapidan Energy Group) was more optimistic.

Lavrov said that Russia could accept the Iran nuclear agreement and Shenzhen lockdowns, but there are talks of an arrangement between Russia and Ukraine. He said that he understood why the deal was made, but that he didn’t believe it was over.

His comments about oil prices were: “So, I fear we likely have to go lower before we can go much higher,”

— CNBC’s Evelyn Cheng contributed to this report.