Oil is falling as the increase in Covid cases in China affects the demand outlook

Oil prices fell on Thursday as rising COVID-19 cases in China dampened hopes of a recovery in fuel demand in the world’s second-largest oil consumer.

The scale of the recent outbreak in China and scepticism about official data has prompted some countries to enact new travel rules on Chinese visitors, even as Beijing began slamming authorities there on the world’s strictest lockdown and testing regime.

Brent crude futures for February delivery fell 42 cents, or 0.5 percent, to $82.84 a barrel by 0123 GMT, while US crude fell 50 cents, or 0.6 percent, to $78.46 a barrel.

Oil markets were also affected by expectations of raising US interest rates again in the United States, as the Federal Reserve tries to limit the rise in prices in the labour market, which suffers from scarcity.

US crude oil inventories fell less than expected, by about 1.3 million barrels, in the week ending Dec. 23, according to market sources citing figures from the American Petroleum Institute, down from analysts’ estimates of a draw of 1.5 million. The US government will release its weekly numbers at 10:30 a.m. EST on Thursday.

The markets got some support from Russian President Vladimir Putin by banning the export of crude oil and oil products from February 1 for five months to countries that adhere to the Western price ceiling.