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Oil Prices Jump As China Relaxes Covid Rules

Last week, Beijing announced the most sweeping changes to its strict Covid-19 guidelines, including relaxing testing requirements and travel restrictions. Further, people infected with Covid-19 but have only mild or no symptoms are now allowed to isolate at home instead of convalescing in centrally managed facilities.

And now Beijing has moved to drop another key Covid-19 measure: China has announced plans to stop tracking some travel on Monday, potentially reducing the likelihood people will be forced into quarantine for visiting COVID-19 hot spots.

The surprise announcement comes just a month after Beijing doubled down what is widely viewed as overly strict Covid-19 measures. For nearly three years, China has been implementing some of the world’s strictest pandemic control policies, imposing incessant lockdowns across the country, shutting down borders, and conducting mass-scale COVID-19 tests to contain the spread of the virus. 

Just a couple of months after reopening the economy, the main districts of Chinese tech hub Shenzhen was forced to go back into lockdown, extended curbs on public activities, and shut down public transport as cities across China continued to battle fresh COVID-19 outbreaks that have dampened the outlook for economic recovery. Beijing handed down orders that residents in six districts comprising the majority of the city’s population of 18 million be tested twice for Covid-19 over the weekend, and employees must work from home.  

With Chinese leader Xi Jinping being granted an unprecedented third term as president, the zero-COVID policy appeared cemented in stone. But millions of Chinese residents had grown wary of these stringent measures and launched widespread protests. Xi Jinping may be the most powerful autocrat in the world, but he has been  forced to pirouette to meet the demands of ordinary Chinese fed up with his failed “zero-Covid” strategy. 

The developments have been positive on energy markets, with both gas and oil prices rallying since Beijing did an about-face on Covid-19.

The reopening of China, coupled with Russia’s struggle to find buyers for its oil, could see oil top $100 in 2023, UBS analysts said on Monday. 

By Alex Kimani for Oilprice.com

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