Oil prices down as China tightens virus restrictions

Oil prices declined on Friday over the resurgence of coronavirus infections in the world’s second-largest oil consumer, China, as the country tightened lockdowns and restrictions, intensifying concerns over weak demand.

International benchmark Brent crude was trading at $55.47 per barrel at 0659 GMT for a 1.12% decrease after closing Thursday at $56.10 a barrel.

American benchmark West Texas Intermediate (WTI) was at $52.46 per barrel at the same time for a 1.26% drop after ending the previous session at $53.13 a barrel.

After reaching 11-month highs following the OPEC+ decision to cut 1 million barrels per day in February and March, which was backed by the widespread vaccine rollout, Brent hovered lower for some time.

“New restrictions will be in place during the coming [Lunar New Year] holiday season and it’s sure that less fuel will be consumed than what would normally be the case,” Norway-based Rystad Energy’s head of oil markets, Bjornar Tonhaugen, told Anadolu Agency.

Underlining that China is a crucial oil market, he said “a slowdown there is always a bearish indicator.”

Meanwhile, markets are still focusing on the much-awaited $1.9 trillion aid package that the new US Administration pledged.

Soon after his inauguration on Wednesday, US President Joe Biden announced his strategy to combat the COVID-19 outbreak and promised that he would do his best to approve the support package as soon as possible.

“We’ll be doing committee work all next week so that we are completely ready to go to the floor when we get back in February,” House Speaker Nancy Pelosi told reporters on Thursday.

When the US implements the stimulus package, Tonhaugen said that he expects to see a rise in short-term oil consumption.

“The Biden administration’s actions are expected to reduce long term oil demand. This will not be immediately visible in his first term though, as the stimulus package and the infrastructure plan the new administration is putting forward will cause an uptick in oil consumption,” he said.

Article source: https://nation.com.pk/22-Jan-2021/oil-prices-down-as-china-tightens-virus-restrictions