Oil prices drop as China COVID-19 cases trigger crackdown


In this news, we discuss the Oil prices drop as China COVID-19 cases trigger crackdown


MELBOURNE / SINGAPORE (Reuters) – Oil prices fell on Friday, retreating further from 11-month highs reached last week, weighed down by fears that new pandemic restrictions in China will reduce fuel demand from the world’s largest importer of oil.

U.S. West Texas Intermediate (WTI) crude futures fell 53 cents, or 1%, to $ 52.60 a barrel at 4:45 a.m. GMT, after slipping 18 cents on Thursday.

Brent futures fell 45 cents, or 0.8%, to $ 55.65 a barrel, erasing a gain of 2 cents on Thursday.

The pick-up in fuel demand in China supported market gains late last year, while the US and Europe lagged behind, but that source of support fades as a new wave of COVID-19 cases has triggered new restrictions to contain the spread.

“Indeed, investors are struggling to see through short-term pain for long-term gain as the weekend approaches, as the number of COVID cases in China is the primary demand issue for traders. Axi chief market strategist Stephen Innes said in a note.

The Shanghai Mall on Thursday reported its first locally transmitted cases in two months, and Beijing is urging people not to travel during the upcoming Lunar New Year holiday, when tens of millions of urban workers typically return to their villages.

A seasonal surge in gasoline demand in China, which is typically seen over the New Year holidays, will be moderated by the tightening of restrictions this year, consulting firm FGE said in a note.

“We now have data on vaccine deployments, which shows that acceptability is a bit low, so the pace of implementation may be slow… There may well be a developing bearish momentum (in oil markets) Said Sukrit Vijayakar, director of Trifecta Energy Consulting.

The market awaits official oil inventory data from the US Energy Information Administration on Friday, after industry data on Wednesday showed a surprise 2.6 million barrels increase in US crude inventories last week compared to analysts’ forecasts for a draw of 1.2 million barrels. [API/S]

Report by Sonali Paul in Melbourne and Koustav Samanta in Singapore; Editing by Ana Nicolaci da Costa and Simon Cameron-Moore

Original © Thomson Reuters

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