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 $0.83, or 1.5%, at $55.59 by 1316 GMT, after gaining 0.6% on Thursday. US West Texas Intermediate crude was down $0.57, or 1.1%, at $53 a barrel, having risen more than 1% the previous session.
Brent and US crude are heading for their first weekly declines in three weeks.
While producers are facing unparalleled challenges while balancing supply and demand involving vaccine rollouts, 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 coronavirus infections, appearance of new variants, delayed vaccine rollouts and renewed lockdown measures in most major OECD economies have clouded the economic and demand recovery,” said Stephen Brennock of oil broker PVM. “Simply put, near-term demand expectations aren’t too promising.”
A nearly $2 trillion Covid-19 relief package in the United States 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% 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 as it suffered its first coronavirus death on the mainland since May.
“The Covid-19 pandemic’s spread is taking centre stage again and traders are getting increasingly worried about the long duration of European lockdown and about the new restrictions (in) China,” said Bjornar Tonhaugen from Rystad Energy.
“The market is structurally bullish, but it may be getting too ahead of forward-looking fundamentals.”