Oil down over demand woes as China eases COVID restrictions amid rising cases

By Sibel Morrow

ANKARA (AA) - Oil prices edged lower on Wednesday over demand fears as China shifts away from its zero-COVID policy amid surging cases and over restarting production in the southern US state of Texas after a cold snap disrupted the largest oil-producing state’s refineries.

International benchmark Brent crude traded at $84.33 per barrel at 10.08 a.m. local time (0708GMT), down 0.41% from the closing price of $84.68 a barrel in the previous trading session.

American benchmark West Texas Intermediate (WTI) traded at $79.06 per barrel at the same time, a 0.59% loss after the previous session closed at $79.53 a barrel.

The world’s largest oil-importing country China on Monday announced that it will downgrade coronavirus from a Class A infectious disease to Class B to further ease measures in the country.

Also, passengers entering the country and COVID-19 patients will not be quarantined as of Jan. 8.

However, reports that some hospitals in certain provinces are nearly over capacity as cases surge are fueling worries that it will take longer than expected for the economy to return to normal and that oil demand will remain weak, while also capping prices.

- Cold weather impact on US production

Over the holiday week, a massive winter storm hit much of the Midwest and northern US, claiming 48 lives in the process and blanketing the regions with record-setting snow and ice.

The Arctic blast across the country also prompted the closure of several oil refineries. Chevron Phillips Chemical shut down three polyethylene plants in Baytown, Texas due to prolonged forecasts of freezing temperatures.

- Russia to cut oil supply to sanctioning states

Increasing supply concerns and limiting further price declines, Russian President Vladimir Putin on Tuesday signed a decree prohibiting supplies of oil and petroleum products to countries which imposed a price cap on Russian fuel.

The decree, published on the governmental portal, comes into effect on Feb. 1 and will be valid until July 1, 2023.

The ban is applicable to contracts which "expressly or indirectly" contain either the term "price cap" or a mechanism for setting a price limit at any stage of supply from the producer to the end buyer.

Supplying Russian oil and petroleum products to countries that have introduced a price cap will be possible only on the basis of a special resolution from Putin, the decree said.