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Oil futures were slightly lower Wednesday, with optimism over the demand outlook stemming from China’s continued relaxation of COVID-19 curbs offset by a surge in cases of the disease.
Price action
-
West Texas Intermediate crude for February delivery
CL.1,
-0.78%
CL00,
-0.78%
CLG23,
-0.78%
fell 30 cents, or 0.4%, to $79.23 a barrel on the New York Mercantile Exchange. -
February Brent crude
BRNG23,
-0.89% ,
the global benchmark, was down 23 cents, or 0.3%, at $84.45 a barrel on ICE Futures Europe. March Brent
BRN00,
-0.67%
BRNH23,
-0.67% ,
the most actively traded contract, was down 28 cents, or 0.3%, at $84.40 a barrel. -
Back on Nymex, January gasoline
RBF23,
-0.81%
fell 0.4% to $2.351 a gallon, while January heating oil
HOF23,
-1.36%
lost 1.3% to $3.313 a gallon. -
January natural gas
NGF23,
-7.71%
dropped 5.8% to $4.977 per million British thermal units.
Market drivers
China moved this week to lift quarantine and testing requirements for inbound passengers. Earlier this month, the country moved to ease domestic COVID restrictions, triggering a massive wave of infections across the country, which had been nearly virus-free for much of the pandemic due to rigid control measures.
Those control measures were seen limiting demand for crude from one of the world’s largest energy consumers. China moved to ease its restrictions after waves of protest about lockdowns and restrictions.
Read: Chinese are snapping up flights abroad as Beijing drops more travel restrictions
“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,” said Raffi Boyadjian, lead investment analyst at XM, in a note.
“With Covid infections still very high, it could be several weeks if not months before demand fully recovers in China and oil prices are slipping today as investors reassess the outlook,” he wrote.
Russian President Vladimir Putin on Tuesday announced a ban on the sale of oil which would allow exports to countries imposing a price cap only in the case of a special exemption from the Kremlin.
See: Kremlin bans sale of Russian oil to countries that impose price cap
“There was also some expectation that Russia might have announced much tougher restrictions on its exports of crude oil and oil products than the ones it did on Tuesday,” Boyadjian said.
“Moscow’s counter measures to the West’s price cap only went as far as refusing to sell to buyers who are complying with the cap, either directly or indirectly, while the fact that Russian oil is already being sold at less than $60 a barrel means that there will be a limited impact on supply,” he said.
