Oil prices tumbled in volatile trade on Monday, reversing most of the previous session’s gains as markets braced for an expected drop in demand due to mass testing for COVID-19 in China, which slammed it. outweighed lingering concerns about limited supply.

Brent crude futures fell $2.08, or 1.9%, to $104.94 at 12:21 GMT after climbing 2.3% on Friday. U.S. West Texas Intermediate (WTI) crude futures fell $2.55, or 2.4%, to $102.24, erasing a 2% gain from Friday.

The market was shaken by the news that China had discovered its first case of a highly transmissible subvariant of Omicron in Shanghai and new cases had risen to 63 in the country’s largest city, from 52 the day before. .

The discovery of the new subvariant and the highest number of new daily cases in Shanghai since May could lead to a new round of mass testing, which would hurt fuel demand.

“The main driver of the decline is growing concern over a global economic slowdown and with that the affordability of sustained high oil prices,” Investec Risk Solutions said in a note.

“The combined impact of concerns over the global economic slowdown and a new COVID outbreak could hardly come at a worse time for oil markets.”

The market remains nervous over plans by Western countries to cap Russian oil prices, with Russian President Vladimir Putin warning that further sanctions could have “catastrophic” consequences for the global energy market.

JP Morgan said the market was caught between worries about a potential Russian supply halt and a possible recession.

“Macro risks are becoming more and more bilateral. A retaliatory cut of 3 million barrels per day of Russian oil exports is a credible threat and, if materialized, will drive Brent crude oil prices to around $190 a barrel,” the bank said in a note. .

“On the other hand, the impact of significantly weaker demand growth in recessionary scenarios would see the price of Brent crude oil average around $90/bbl in a mild recession and $78/bbl bbl in a more severe downturn scenario.”

Questions also remain over how long more crude will exit Kazakhstan through the Caspian Pipeline Consortium (CPC).

Supply has continued so far on the pipeline, which carries around 1% of the world’s oil, as a Russian court on Monday overturned an earlier ruling suspending operations there.

Be smart with your money. Get the latest investing news straight to your inbox three times a week, with the Globe Investor newsletter. register today.