China put more than 35,000 residents in a northern county on lockdown as of Monday to contain a new COVID flare-up in the country - a development which the oil market is ignoring so far as overall bullish sentiment prevails.
In a bid to quickly contain a fresh outbreak in Ejin, a county in the region of Inner Mongolia, Chinese authorities asked residents to stay at home from today.
China expects new cases to rise in coming days, a health official cited by Bloomberg said on Sunday.
China typically acts very quickly to lock down towns and cities in case of rising COVID cases, and questions remain whether the lockdown this time will extend to more provinces and regions to the extent of slowing down Chinese fuel demand and economic growth.
As of Monday, the oil market largely shrugged off the news out of China, amid a prevailing bullish sentiment with dwindling global inventories and rebounding oil demand. Early on Monday, both benchmarks hit fresh multi-year highs, with the U.S. benchmark, WTI Crude, trading at $84.82, up 1.23%, and Brent Crude sitting above $86, at $86.46, up 0.98% on the day.
The COVID flare-ups in the summer in China led to more lockdowns and oil prices pulling back for a few weeks, with estimates from Goldman Sachs pointing at the time that Chinese demand could be 1 million barrels per day (bpd) lower for two months than previously expected.
"For now, the market does not appear concerned about the Covid-19 outbreak in a number of provinces in China. China has, however, demonstrated multiple times that it is able to get outbreaks under control fairly quickly," ING strategists Warren Patterson and Wenyu Yao said on Monday.
"Some worrying Covid flare-ups were back in the headlines over the weekend, prominently in China, but were not impacting the buying rush in crude futures," Vanda Insights said in a note.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More