Shanghai and Beijing were placed on new Covid-19 alerts on Thursday after they imposed further lockdown restrictions and the city announced a round of mass testing for millions of residents. The restrictions coming back parts of China's main economic centre has led to a decline in crude oil prices and metals.
Brent crude futures for August settled down 51 cents at USD 123.07 a barrel, a 0.4 percent decline, while US West Texas Intermediate crude for July lost 60 cents, or 0.5 percent, to USD 121.51 a barrel.
Oil prices have been rallying steadily over the last two months, led by big increases in prices of refined products due to tight refining supply and surging demand.
Also, the strength of the US dollar, trading yet again above 103, seems to be putting some pressure, but even with these kinds of numbers, the crude oil prices held above $120 per barrel.
The markets will watch out for the US Fed meeting next week. ECB already raised interest rates by 25 basis points and further hikes could be coming in the month of September, which may be weighing on the prices.
However, after yesterday's sell-off, natural gas prices have rebounded. It's back at around $9 per mmBtu on low inventory pick up into the US market and that is supporting the prices.
Watch the accompanying video of CNBC-TV18’s Manisha Gupta.
(with input from Reuters)