Oil prices fell on Thursday, as investors worried about declining gasoline consumption in China, the world’s largest oil importer, as a result of COVID-19 regulations.
By 04:26 GMT, Brent crude futures had fallen $1.48, or 1.41 percent, to $103.84 a barrel. Crude oil futures in the United States fell $1.39, or 1.36 percent, to $100.63 a barrel.
Due to persistent concerns about constrained global supply and another depletion in U.S. distillate and gasoline stockpiles, both futures finished nearly 30 cents higher in the previous session.
Crude stocks increased by only 692,000 barrels last week, falling short of estimates, while distillate inventories, which include diesel and jet fuel, plummeted to their lowest level since May 2008.
On Thursday, China’s capital Beijing restricted certain public venues and increased checks at others, as the city’s 22 million inhabitants participated in further COVID-19 mass testing to avoid a Shanghai-style lockdown.
“The biggest opposing factor (to price appreciation) is the Chinese lockdown,” said Stephen Inns, managing partner at SPI Asset Management.
China’s market for refined oil products is expected to recover in the second quarter, according to Asia’s largest oil refiner, Sinopec Corporation, as COVID-19 outbreaks across the country are steadily controlled.
Analysts also noted that a slowdown in global development as a result of rising commodity prices, as well as an intensification in the Russia-Ukraine war, might heighten concerns about oil consumption.
According to Ajay Kedia, head of energy consultancy Kedia Advisory, investors are attempting to balance supply and demand fears about Russian oil and gas disruptions, as well as a worsening global economic outlook.
According to Reuters polls of over 500 analysts, the global economy would grow more slowly than expected three months ago.
From 4.3 percent and 3.6 percent in a January survey, median global growth projections in this month’s Reuters polls on over 45 economies were cut to 3.5 percent this year and 3.4 percent in 2023.
In comparison, the International Monetary Fund forecasts growth of 3.6 percent in both years.
Meanwhile, in Japan, another big crude oil customer, the central bank reaffirmed its large stimulus package on Thursday, as well as a commitment to keep interest rates ultra-low, in order to support a faltering economy despite strong increases in raw material costs pushing up inflation.