Oil prices fell on Thursday, extending sharp losses from the previous session, as China’s extension of lockdown measures to curb the Covid-19 spread exacerbated concerns that a slowdown in economic activity globally would hit fuel demand.

Brent crude futures lost 40 cents, or 0.4 per cent, to $87.60 per barrel by 1002 GMT, near a late-January low. US crude futures were down 41 cents, or 0.5pc, at $81.53 a barrel, near a mid-January low.

Saxo Bank analyst Ole Hansen said the decline was “driven by continued demand worries related to the risk of growth-killing rate hikes from central banks battling runaway inflation and China’s continued economic struggle caused by its Covid-zero policy”.

China’s Chengdu extended a lockdown for a majority of its more than 21 million residents on Thursday to prevent further transmission of Covid-19 while millions more in other parts of the country were told to shun travel in upcoming holidays.

Meanwhile, a number of central banks around the world are expected to begin a new round of interest rate hikes to fight inflation.

The European Central Bank is expected to raise interest rates sharply when it meets later on Thursday. A US Federal Reserve meeting follows on Sept 21.

Prices drew some support, however, from Russian President Vladimir Putin’s threat to halt the country’s oil and gas exports if price caps are imposed by European buyers.

The European Union proposed capping Russian gas prices only hours later, raising the risk of rationing in some of the world’s richest countries this winter if Moscow carries out its threat. Russia’s Gazprom has already halted flows from the Nord Stream 1 pipeline, cutting off a substantial percentage of supply to Europe.

Elsewhere, reacting to soaring energy prices, Britain’s new Prime Minister Liz Truss will on Thursday scrap the country’s fracking ban and will seek to make more use of its reserves in the North Sea, the Telegraph newspaper reported earlier.

JP Morgan said Opec+ may need to cut production by 1m barrels per day to “stem the downward momentum in prices and realign physical and paper markets which appear disconnected”.

The Organisation of the Petroleum Exporting Countries and allies led by Russia, collectively known as Opec+, agreed on Monday to cut their output by 100,000 bpd for October.