Oil prices fall on worries about China’s Covid surge, global recession

London — Oil prices fell on Wednesday on concerns that rising Covid-19 cases in China, the world’s top oil importer, will disrupt its economic recovery and fuel demand growth as it unwinds its pandemic restrictions.

Brent futures for February delivery fell $0.78, or 0.9%, to $83.55 a barrel, by 0900 GMT. US crude fell $0.75, also 0.9%, to $78.78 per barrel.

Both benchmarks fell by more than $1 per barrel earlier in the session after rising to their highest in three weeks on Tuesday on hopes for a fuel demand boost.

China said it will stop requiring inbound travellers to go into quarantine starting from January 8, a major step towards relaxing stringent curbs on its borders.

But Chinese hospitals have been under intense pressure due to a surge in Covid-19 infections as the country moves towards treating the virus as endemic.

“Even after China eased Covid restrictions, it is difficult for demand to recover in a short time due to the rapid decline of people’s outdoor activities due to the massive infection (numbers),” said Leon Li, an analyst at CMC Markets.

Oil refiners in the US on Tuesday were working to resume operations at a dozen facilities knocked offline by freezing weather across much of the country, a recovery that in some cases will stretch into January.

The Arctic blast that sent temperatures well below freezing also disrupted output, cutting oil and gas production from North Dakota and Texas.

Prices were supported by news that Russia aims to ban oil sales from February 1 to countries that abide by a G7 price cap imposed on December 5.

US crude oil stocks were estimated to have fallen 1.6 million barrels last week with distillate inventories also seen down, a preliminary Reuters poll showed on Tuesday.

Industry group the American Petroleum Institute is due to release data on US crude inventories at 2130 GMT on Wednesday. The US energy department will release its own figures at 1530 GMT on Thursday.

Reuters