Oil prices settled around $3 lower on Monday, dragged down by a firmer U.S. dollar while surging coronavirus cases in China dashed hopes of a swift reopening of the economy for the world's biggest crude importer.
Brent crude futures settled down $2.85, or 3%, at $93.14 a barrel after gaining 1.1% on Friday. WTI crude futures settled down $3.09, or 3.47%, to $85.87 after advancing 2.9% on Friday.
On Friday, commodities prices rallied after China's National Health Commission adjusted its COVID prevention and control measures to shorten quarantine times for close contacts of cases and inbound travellers.
But COVID-19 cases climbed in China over the weekend, with Beijing and other big cities on Monday reporting record infections.
"The surge in COVID cases will only lead to more lockdowns in the near term...for now China is not a source of bullish support for the petroleum complex," said John Kilduff, partner at Again Capital LLC in New York.
The U.S. dollar also rose against the euro and yen, as investors braced for potential U.S. Federal Reserve interest rates hikes after a policymaker said too much was being made of last week's cooler U.S. inflation data.
A stronger dollar makes dollar-denominated commodities more expensive for holders of other currencies and tends to weigh on oil and other risk assets.
The Organization of the Petroleum Exporting Countries (OPEC), meanwhile, cut its forecast for global oil demand growth this year and next, citing economic headwinds.
U.S. domestic supply also continues to rise. Oil output in the Permian in Texas and New Mexico, the biggest U.S. shale oil basin, is due to rise by about 39,000 barrels per day (bpd) to a record 5.499 million bpd in December, the U.S. Energy Information Administration (EIA) said in its productivity report on Monday.
Separately, U.S. Treasury Secretary Janet Yellen on Friday said India can continue buying as much Russian oil as it wants, including at prices above a G7-imposed price cap mechanism, if it steers clear of Western insurance, finance and maritime services bound by the cap.