Despite the fall, oil remains almost 80% higher than it was a year ago after the war in Ukraine helped to drive up prices.
Traders were concerned about the effectiveness of China’s zero-tolerance policy towards Covid, said Stephen Innes, managing partner at SPI Asset Management.
Mr Innes also said in a note to investors that there were expectations of further supply chain disruptions as well as a fall in demand.
“We might be only dealing with the tip of the iceberg,” he said.
However, Dan Wang, chief economist at Hang Seng Bank China, does not expect the lockdown to have a major impact on supply chains.
Most factories continue to operate as usual, and workers are either being confined on-site or given priority for testing, the Shanghai-based economist told the BBC.
“The suburbs are controlled quite well and quite tightly,” she said. “Supply chain stability is a priority in this round.”
She added that, given the spike in Covid cases, there were expectations of more government stimulus and interest rates could be lowered “quite significantly” in the coming days.
As long as they are passed on by banks, lower interest rates make it less costly for businesses and individuals to borrow money.
Meanwhile, the Shanghai Composite stock index opened lower on Monday before rebounding to trade down by just 0.3% in Asia afternoon trade.
Until now, Chinese authorities had resisted locking down the city of almost 25 million people to avoid destabilising the world’s second largest economy.
The city will be locked down in two stages over nine days while authorities carry out Covid-19 testing.
The key financial centre has battled a new wave of infections for nearly a month, although case numbers are not high by some international standards.
It comes after lockdowns in China affected tens of millions of people across the country earlier this month, including the entire Jilin province and the technology hub of Shenzhen.
Shanghai’s public transport has been suspended and firms and factories in the city have been ordered to halt operations or work remotely.
The lockdown will take place in two stages, starting on Monday with the eastern side of Shanghai, which includes the city’s financial centre.
From Friday, the western side of Shanghai is scheduled to go into lockdown.
This staggered approach means that half of the city will be able to remain open.
Some businesses had already stopped operating in Shanghai, which has been battling a new wave of Covid infections for nearly a month.
Last week, the Shanghai Disney Resort said it would close until further notice, citing the “current pandemic situation”.
“We will continue to monitor the pandemic situation and consult local authorities, and will notify guests as soon as we have a confirmed date to resume operations,” it said.