By Adedapo Adesanya
Crude oil prices settled lower on Thursday on fears over the economic outlook of the world’s biggest oil importer, China, weakening the Brent crude futures by $1.40 or 1.9 per cent to $74.42 a barrel and the United States West Texas Intermediate (WTI) crude futures by $1.42 or 2 per cent to $70.94 a barrel.
The market was dealt the hand following rating downgrades to two Chinese property developers just as some governments took measures to fight the Omicron variant of the coronavirus.
On Thursday, rating agency Fitch downgraded property developers China Evergrande Group and Kaisa Group to “restricted default” status, saying they had defaulted on offshore bonds.
The news worsened investors’ fears about the growth of China’s economy which by extension could impact the oil-buying appetite of the world’s biggest crude customer, according to market analysts.
Their struggle to turn assets into cash had prompted fear a default might chill Chinese lending markets and cause global shockwaves.
This is coming after major economies continued making stricter moves to counter the spread of the Omicron variant.
Britain imposed tougher COVID-19 restrictions in England, saying people should work from home where possible, wear masks in public places and show COVID-19 vaccine passes for entry to certain events and venues.
Denmark also plans new restrictions, including the closure of restaurants, bars and schools, while China has halted group tourist trips while South Korea, Singapore, and Australia continue to get higher cases.
This is being carried out even after laboratory evidence suggested that the Pfizer vaccine has a neutralising effect on Omicron.
US inventory data released on Wednesday also later weighed on prices.
The Energy Information Administration (EIA) data showed that crude inventories were down by 240,000 barrels last week, much less than analysts had expected.
In the US, there was positive data as the number of Americans filing new claims for unemployment benefits dropped last week to the lowest level in more than 52 years amid an acute shortage of workers, according to new data published by the country’s labour department.
Modupe Gbadeyanka