It is unclear, however, if the drop will last and if or when it will have an impact on the prices at the pumps. Industry leader Brent crude fell $6.45, or 5.7 percent, selling at $105.94 a barrel.
US West Texas Intermediate crude fell $6.68, or 6.1 percent, to $103.09 a barrel.
Primarily prices have fallen due to concerns among investors around the continued Covid lockdowns in China leading to a slowing of demand in the world’s second largest economy.
Unlike the majority of other countries, China is pursuing a dynamic zero Covid policy aiming to stop the majority of infections through lockdowns, mass testing and quarantines.
This can mean a prolonged lockdown in cities where cases are identified, leading to a sharp reduction in economic activity and reduction in demand for oil.
Despite the drop in demand, China’s crude oil imports grew nearly 7 percent in April compared to the same month last year.
Andrew Lipow, president of Lipow Oil Associated in Houston said: “The Covid lockdowns in China are negatively impacting the oil market, which is selling off in conjunction with equities.”
Investors have also been worried about the impact of interest rate increases and the possibility of a recession.
At the same time, there have been a number of other developments which have helped stabilise prices.
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Output had fallen in April after Western countries imposed sanctions on Moscow following its invasion of Ukraine.
Last week, the European Commission proposed a phased embargo on Russian oil.
This helped boost the Brent Crude and WTI prices as it avoided the possibility of an immediate embargo which would have forced prices up rapidly due to concerns about supply.
In the early weeks of the war in Ukraine with investors concerned about supply prices rocketed to $140 a barrel at one point.
The European Commission is considering offering support to landlocked Eastern European EU countries to upgrade their infrastructure in order to pursue them to support the embargo.
Bjørnar Tonhaugen, Rystad Energy’s head of oil market research, said: “The EU oil embargo will trigger a seismic shift in the European and global crude markets, which Rystad Energy expects could see as much as 3.0 million bpd (barrels per day) of EU crude imports from Russia cut by December 2022 in a full-fledged implementation of the policy.”