Oil prices fell on Friday as concerns about Chinese cities in lockdown due to coronavirus outbreaks tempered a rally driven by strong import data from the world’s biggest crude importer and US plans for a large stimulus package.
Brent was down 86 cents, or 1.5 percent, at $55.56 by 1227 GMT, after gaining 0.6 percent on Thursday. US West Texas Intermediate crude was down 58 cents, or 1.1 percent, at $52.99 a barrel, having risen more than 1 percent the previous session.
While producers are facing unparalleled challenges balancing supply and demand equations with calculus involving vaccine rollouts versus lockdown, financial contracts have been boosted by strong equities and a weaker dollar, which makes oil cheaper, along with strong Chinese demand.
“The recent resurgence in coronaries infections, appearance of new variants, delayed vaccine rollouts and renewed lockdown measures in most major OECD economies has clouded the economic and demand recovery,” said Stephen Greenock of oil broker P.M.
“Simply put, near-term demand expectations aren’t too promising.”
A nearly $2 trillion COVID-19 relief package in the US unveiled by President-elect Joe Biden may increase oil demand from the world’s biggest crude consumer, but worse than expected jobs data cast a shadow over the plans.
Crude imports into China were up 7.3 percent in 2020, with record arrivals in two out of four quarters as refineries increased runs and low prices prompted stockpiling, customs data showed on Thursday.
But China reported the highest number of daily COVID-19 cases in more than 10 months on Friday, capping a week that has resulted in more than 28 million people under lockdown and the country’s first death from the coronaries in eight months.
“The COVID-19 pandemic’s spread is taking center stage again and traders are getting increasingly worried about the long duration of European lockdown and about the new restrictions (in) China,” Bjornar Tonnage from Rystad Energy said.
“The market is structurally bullish, but it may be getting too ahead of forward-looking fundamentals.”