Oil weakens amid thin trading on China uncertainty

Oil prices fell by more than one dollar on Thursday, as more countries ponder new restrictions on flight passengers coming from Chinese airports. This news is raising concerns over demand during a prevalent state of uncertainty about COVID-19 infections spreading in China.

Conflicting headlines about demand from top oil importer China have battered traders in the few previous weeks. While the government is easing pandemic restrictions, a surge in infections is prompting some countries to enact travel rules on Chinese visitors.

Earlier on the day, Brent crude futures for February delivery fell by $1.01, or 1.2%, to $82.25 and are trading at $82.50 a barrel at the time of writing. The more actively traded March contract was down about 1%.

West Texas Intermediate crude futures for February delivery are sliding to trade at $77.83; namely closer to the retesting mark of $77.70, but earlier on the day were trading at $78.12 a barrel.

Britain is reviewing whether to impose restrictions on people arriving from China, while the United States, Japan, India and Taiwan imposed testing on arrivals from the country earlier.

Both oil contracts dipped more than 2% earlier during the session, but pared some losses as the U.S. dollar slipped, with investors on edge at the end of the year as initial optimism over China’s reopening fizzled. The weaker US dollar makes oil cheaper for holders of other currencies and can boost demand.

OPEC+ could make an announcement at any point and suddenly everything could change. Not to mention Russia’s war in Ukraine and how that develops. Russia fired scores of missiles into Ukraine early on Thursday, targeting Kyiv and other cities in one of Moscow’s largest aerial assaults since the war started.

Oil prices also gained some support after inventories update for last week from the US Energy Information Administration. Despite a surprise build in crude oil stocks, the report itself was positive as it showed a solid rebound in implied oil demand, resulting in large draws of refined products last week.

Trading volumes have been thin this week. Crude is heading for the first back-to-back quarterly loss since 2019 after a volatile year that saw futures surge following Russia’s invasion of Ukraine before retreating as concerns over a global economic slowdown accelerated.