Oil prices decline as the yuan increases and China's COVID-19 troubles intensify

Oil prices fell by almost 2% on Tuesday, extending losses from the previous session, as a stronger U.S. dollar and an increase in COVID-19 cases in China fuelled fears of a global demand slowdown.

At 00:31 GMT, Brent crude futures fell 57 cents, or 0.6%, to $95.62 a barrel, after falling $1.73 in the previous session.

The price of U.S. West Texas Intermediate crude decreased by 55 cents, or 0.6%, to $90.58 a barrel, following a loss of $1.51 in the previous session.

The U.S. dollar rose for the fourth straight session on Monday as investors anticipated the release of high inflation statistics this week, resulting in the belief that the Federal Reserve will retain its aggressive monetary policy.

A strong dollar reduces the demand for oil by increasing its price for overseas consumers.

Monday, Lael Brainard, vice chair of the Federal Reserve, warned that recent rate hikes have begun to slow the economy and that the full impact of tighter policy will not be felt for several months.

ANZ Research analysts noted in a research, "Strong employment data has strengthened expectations for another 75 basis point rate hike at the Fed's meeting next month, generating negative risk for global oil demand."

Analysts said that China's continued zero COVID-19 policy prior to a Communist Party congress "does not assist" demand.

Since August, 19 cases have increased in the second-largest oil consumer in the world. For the first time in four months, its services activity decreased in September due to pandemic restrictions.

Since the beginning of October, thousands of cases caused by the highly transmissible Omicron sub-variants BF.7 have been documented in Inner Mongolia, making it the newest COVID epicenter in the country.

Last week, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, known collectively as OPEC+, decided to decrease their production target by 2 million barrels per day in an effort to prevent losses, thereby heightening fears on diminishing oil supplies.

"The supply concerns persist owing to sanctions on Russia, especially when the EU restricts Russian oil imports at the end of the year," said Tina Teng, an analyst at CMC Markets.

EU sanctions on Russian crude and oil products will take effect in December and February, respectively, and the bloc received final agreement last week for a new package of measures against Russia, including an export price ceiling.

Petroleum Minister Hardeep Singh Puri told Reuters that India has an "excellent relationship" with Russia and that it will assess any bids made following a restructuring of Sakhalin-1's ownership.

On Friday, Russia issued an order permitting it to seize 30% of Exxon Mobil's (NYSE:XOM) stake and granted a Russian state-owned business the authority to evaluate whether multinational shareholders, such as India's ONGC Videsh, may continue to participate in the project.