The price of crude dropped on Friday, receding from the 11-month highs hit last week. Experts say the new coronavirus restrictions in China could curb fuel demand for the world’s biggest oil importer.
International benchmark Brent slid over one percent to $55.49 a barrel, while US West Texas Intermediate (WTI) was trading down 1.2 percent at $52.48 a barrel as of 07:57 GMT.
The recovering fuel demand in China propped up the oil market late last year. “Indeed, investors are struggling to see through short-term pain for long-term gain heading into the weekend, as Covid case counts in China are the most significant demand concern for traders,” Axi Chief Market Strategist Stephen Innes said in a note seen by Reuters.
Beijing launched mass Covid-19 testing in some areas on Friday, while Shanghai was testing all hospital staff after reporting its first locally transmitted cases in two months on Thursday. The authorities are now urging people not to travel during the upcoming Lunar New Year holiday.
According to consultancy FGE, the seasonal boost to China’s gasoline demand typically seen during the New Year holidays will be moderated by the tightened restrictions this year.
“We now have some data on vaccine rollouts, which show that acceptability is a bit on the low side, so pace of implementation may be slow… There may well be a bearish momentum developing (in oil markets),” said Sukrit Vijayakar, director of energy consultancy Trifecta.
The US Energy Information Administration is expected to report official oil inventory data on Friday, after industry data showed a surprise 2.6 million barrel increase in US crude inventories last week, compared with analysts’ forecasts for a 1.2 million barrel draw.
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