Oil Drops Further as Concerns over Fresh Covid Wave in China Grows

Oil prices extended losses on Wednesday as traders weighed concerns about China’s rapid removal of its harsh Covid Zero policy, which could result in an increase in cases around the world.

Brent crude futures fell $0.26, or 0.31%, to settle at $83.00 a barrel, while U.S. West Texas Intermediate crude futures settled at $78.59 per barrel, down 37 cents, or 0.47% as of 10.44 A.M. (Thai time).

China has announced that it will no longer require inbound travelers to be quarantined beginning January 8, a huge step toward loosening tight border controls. However, due to an increase in Covid infections, Chinese hospitals have been under severe pressure.

Following China’s announcement, several major economies, including the United States, Italy and Japan, imposed new Covid-19 restrictions on all visitors from China and its territories, Hong Kong and Macau.

The United States will require airline passengers from China to show negative virus tests, while Italy will begin testing arrivals from the Asian country. Meanwhile, Japan already said that anyone traveling from China or visiting mainland China within the previous seven days will be required to take a negative Covid-19 test upon arrival.

“The removal of travel restrictions could precipitate another global outbreak,” said John Driscoll, director of JTD Energy Services Pte in Singapore. “It raises the potential of a demand hit and flattening prices.”