Crude oil continued its year-long slide, falling as much as 5% on Wednesday, weighed down by demand concerns stemming from the state of the global economy and rising COVID cases in China.
Brent futures fell $4.07, or 4.9 percent, to $78.03 per barrel, while WTI crude in the United States fell $3.80, or 4.9 percent, to $73.13 per barrel.
China’s COVID-19 cases weighed on oil prices as reports emerged that patients are being forced to wait in beds outside hospital entrances and along corridors as hospitals struggled with rising COVID-19 infections.
China has relaxed many of its strict coronavirus rules following a long-held zero-COVID policy, and the disease has been spreading rapidly across the country.
This is expected to impact oil demand in the world’s largest oil importer.
Data from China revealed that, while no new variants were discovered, the country under-represented the number of people who died in its recent rapidly spreading outbreak, according to World Health Organization (WHO) officials.
The WHO is concerned about “risk to life” in China due to an increase in COVID cases, while the Omicron subvariant XBB.1.5 is rapidly spreading in Europe and the United States.
Crude prices were also influenced by the state of the global economy and central bank rate hikes.
The Institute for Supply Management (ISM) reported that manufacturing in the world’s largest economy contracted further in December, falling for the second consecutive month to 48.4 points from 49.0 points in November, the lowest reading since May 2020.
Furthermore, an increase in job creation has raised concerns that the US Federal Reserve will use this as an excuse to keep interest rates higher for longer.
The Chinese government increased export quotas for refined oil products in the first batch for 2023, indicating that low domestic demand is expected.
Saudi Arabia, the world’s largest oil exporter, may cut prices for its flagship Arab Light crude grade to Asia in February, after prices fell to a 10-month low this month due to concerns about oversupply.
