Oil prices slip as China partly shuts world's third biggest port

·2 min read
NINGBO, Feb. 19, 2021 -- Aerial photo taken on Feb. 19, 2021 shows cargo ships docking at Meidong Dock of the Ningbo-Zhoushan port in Ningbo, east China's Zhejiang Province. The Ningbo-Zhoushan port saw its cargo throughput in January reach 2.885 million TEUs (Twenty-foot Equivalent Units), up 14.5 percent year on year. (Photo by Huang Zongzhi/Xinhua via Getty) (Xinhua/Huang Zongzhi via Getty Images)
Cargo ships docking at Meidong Dock of the Ningbo-Zhoushan port in Ningbo, east China's Zhejiang Province. Photo: Xinhua/Huang Zongzhi via Getty Images

Oil prices fell on Friday morning amid concerns about global trade after China closed part of the world's third busiest port.

All container services at Ningbo-Zhoushan port’s Meishan terminal have been halted until further notice after a worker at the port contracted COVID-19.

Brent futures (BZ=F) were down 0.7%, trading at $70.82 (£51.31) and crude futures (CL=F) were 0.9% lower to $68.50.

The Meishan terminal closure is likely to worsen fears about global supply chain issues, which is fuelling global inflation.

The port closure "could add to global supply chain disruptions and become something the market cares about in fairly short order," said AJ Bell financial analyst Danni Hewson.

The outlook for how long the closure could last was unclear. The Yantian port in Shenzhen was closed for about a month in late May after a COVID-19 case was discovered. 

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Oil prices weren't helped by a downbeat assessment from the International Energy Agency (IEA). The IEA said on Thursday that a recovery in the demand for oil had reversed course in July, amid a resurgence in coronavirus cases.

"Growth for the second half of 2021 has been downgraded more sharply, as new COVID-19 restrictions imposed in several major oil consuming countries, particularly in Asia, look set to reduce mobility and oil use," the agency said.

"We now estimate that demand fell in July as the rapid spread of the COVID-19 Delta variant undermined deliveries in China, Indonesia and other parts of Asia."

Elsewhere, the Organization of the Petroleum Exporting Countries' (OPEC) said it still expected a strong recovery in world oil demand in 2021 and 2022. The unchanged forecast came after the US asked OPEC and its allies (OPEC+) to increase oil output to bring down high gasoline prices.

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