21 November 2022 | Other

China's pandemic restrictions put pressure on oil prices

Against the backdrop of an ever-increasing number of COVID-19 cases in China, the country's economic outlook has weakened. This led to the fact that oil prices are under pressure. The People's Bank of China (PBOC) commitment to the current monetary policy and expectations of a less tight policy from the U.S. Fed played an important role in increasing pressure.

Last week, COVID-19 restrictions were eased, including the removal of restrictions on the movement of men and machines. The government took such a step so that business activity could return to normal. Nevertheless, It should be noted that COVID-19 still has a strong influence on the mood of the market.

According to FXStreet's editor, investors are faced with a difficult choice. On the one hand, cases of disease are on the rise, thus, any investment still has high risks. On the other hand, loosened restrictions can have a good impact on returns.

Given the weak real estate demand and even weaker economic outlook, it was expected that the PBOC would choose the path of loose monetary policy. However, the bank decided not to change course. Thus, oil prices could fall seriously.

Oil prices are also influenced by Fed policy expectations. The Fed is expected to act more aggressively. However, the Fed is throwing all the forces into reducing the ever-increasing inflationary pressure, which leads to cuts in consumer spending.

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