China — which is facing its biggest COVID-19 outbreak since the early days of the pandemic — may be one reason for dropping oil prices.

What’s happening: Oil has been surging in recent weeks for a number of reasons, including the ongoing conflict between Ukraine and Russia.

  • Brent crude oil, the world benchmark for crude oil, hit a high of $139.13 on March 7.
  • Not long after, the U.S. benchmark for prices, West Texas Intermediate, hit a high of $130.50, according to Reuters.
  • But prices took a dip in recent weeks due to “a mix of geopolitical and demand factors,” Rebecca Babin, senior energy trader for CIBC Private Wealth U.S., told CNBC.
China’s COVID-19 outbreak continues. Here’s what we know
China is facing its biggest COVID-19 outbreak since 2020

China’s impact: Fox News reported that China may be one reason for falling prices since the country is having multiple lockdowns.

  • Lockdowns are leading to less global energy demand, especially since China is the biggest importer of oil, coal and liquefied natural gas, according to Reuters.

What they’re saying: “We have the re-emergence of Covid in China, which is throwing another spanner into the works when we’re trying to assess what the demand will be,” Richard Gorry, managing director of JBC Energy Asia, told CNBC.

The bottom line: ″(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,” Ray Attrill, head of foreign exchange strategy at National Australia Bank, wrote in a recent note.