Oil prices retreat on demand-linked uncertainity

Crude futures fell amid a state of uncertainty about the possible impact on demand after easing the Chinese Covid-19 restrictions.

Oil sustained losses as the dollar marginally ticked higher and equities erased their gains, easily swayed by broader market swings amid thin liquidity.

West Texas Intermediate fell below $79 per barrel after closing at a three-week high earlier this week. Gains were driven by China’s announcement to continue easing restrictions even as Covid infections do increase. At the time of writing, the American crude trades at $78.76 per barrel.

Volatility was also heightened after the Kremlin said this week that Russian crude oil exports and refined products will be banned to foreign buyers that adhere to the price cap which Moscow rejects.

The expectations for the near future are highly uncertain for the oil market. China’s success in abandoning Covid-Zero policy could be key to a recovery but it will take time to digest the implications of such a decision on the overall global oil demand.

China’s rapid unwinding of its strict Covid Zero policy and a resulting wave of virus cases have hit the market that is subject to sharp swings due to a lack of liquidity.