Oil Prices Shed Gains As China Covid Cases Soar

After Tuesday’s gains on demand optimism over Beijing’s easing of COVID travel restrictions, oil prices reversed course early on Wednesday, edging lower on fears that surging virus cases would hinder a demand uptick. 

Earlier this week, Beijing said it would ease travel restrictions for visitors to China, ending quarantine and testing requirements and opening its borders, allowing international travel to resume beginning on January 8. The announcement has sparked a run on bookings for overseas travel, according to the BBC. 

As of 8:32 a.m. EST, Brent crude was trading at $83.94, down 0.45% on the day, while WTI was trading at 79.31, down 0.28% on the day. 

"The somewhat firmer dollar and doubts about how quickly Chinese demand would bounce back following the country's scrapping of its quarantine rules weighed on oil and other commodities such as copper on Wednesday," Raffi Boyadjian, lead investment analyst at XM, said in a note to clients carried by MarketWatch. 

The move to reopen borders follows Beijing’s decision to ease up on its zero-COVID policy under pressure from protests. 

Last week, a UK research firm cited by Reuters warned that China’s latest Covid-19 wave could be far more serious than the government is claiming, estimating that more than 5,000 people are probably dying each day from COVID-19 in China, with the firm’s mortality risk analysis suggesting that 1.3 to 2.1 million people could die in the country’s current COVID outbreak. 

At the same time, the lifting of travel restrictions is not likely to result in a surge in Chinese travel to some countries, which are considering imposing new limitations on Chinese visitors due to the surge in COVID cases and a lack of accurate data. The U.S. government is among those considering new restrictions. 

"There are mounting concerns in the international community on the ongoing Covid-19 surges in China and the lack of transparent data, including viral genomic sequence data," U.S. officials said in a statement.

"Without this data, it is becoming increasingly difficult for public health officials to ensure that they will be able to identify any potential new variants and take prompt measures to reduce the spread."

By Charles Kennedy for Oilprice.com

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