Oil prices fall on worries about China COVID surge, global recession

LONDON, Dec 28 (Reuters) – 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 78 cents, or 0.9%, to $83.55 a barrel, by 0900 GMT. U.S. crude fell 75 cents, or 0.9%, to $78.78 per barrel.

Both benchmarks fell by over $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 Jan. 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 U.S. on Tuesday were working to resume operations at a dozen facilities knocked offline by freeze 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 Feb. 1 to countries that abide by a G7 price cap imposed on Dec. 5.

U.S. 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 U.S. crude inventories at 4.30 p.m. EDT (2130 GMT) on Wednesday. The U.S. Department of Energy will release its own figures at 10.30 a.m. (1530 GMT) on Thursday.

Reporting by Arathy Somasekhar and Isabel Kua; Editing by Simon Cameron-Moore, Christian Schmollinger and Louise Heavens

Our Standards: The Thomson Reuters Trust Principles.

source: reuters.com