Oil Falls as Countries Consider Restrictions on Chinese Travellers

By Adedapo Adesanya

Oil fell for a second straight session on Thursday as a result of an uncertain demand outlook with COVID-19 infections spreading in the top oil-importing nation, China.

China’s government is dismantling pandemic restrictions that have been in place for more than two years, but more countries are considering restrictions on Chinese travellers with COVID-19 infections spreading.

This weakened the price of Brent crude by $1.00 or 1.2 per cent yesterday to $82.26 per barrel, as the US West Texas Intermediate crude depreciated by $1.13 or 0.7 per cent to $78.40 per barrel.

From the US to Japan, nations are worried that new variants could emerge from China’s continuing outbreak and that the world’s largest oil importer may not inform the rest of the world quickly enough.

India, Italy, and Taiwan have also already imposed bans from next year, but the United Kingdom, Australia, Philippines, and Malaysia are monitoring the situation.

There have been no reports of new variants yet, but there is widespread concern over the lack of information and data from China.

US crude oil inventories rose unexpectedly last week as imports climbed and exports fell, the Energy Information Administration (EIA) said on Thursday.

Crude oil prices moved lower today after the EIA reported an inventory build of 700,000 barrels for the week of December 23 compared with a draw of 5.9 million barrels in the previous week, which had pushed prices higher temporarily.

At 419 million barrels, US inventories are about 6 per cent below the average for this time of the year.

A day earlier, the American Petroleum Institute (API) reported an estimated inventory draw of 1.3 million barrels, the second weekly drop in a row.

Analysts noted that despite the surprise build in crude oil stocks, the report itself was positive and showed a solid rebound in implied oil demand, resulting in large draws of refined products.

Support, however, came as the US Dollar slipped, with investors on edge about interest rate hikes. A weaker dollar makes oil cheaper for holders of other currencies.

Meanwhile, TC Energy Corp said the 622,000-barrel-per-day Keystone pipeline was now operational, weeks after a major oil spill in rural Kansas.

The shutdown of the line hit supplies in the US and briefly lifted oil prices, although there was little change to either benchmark after settlement.