Oil prices fell on Friday as China, the world’s largest importer of crude oil, widened its borders of COVID-19, however, ready to gain weekly gains on supply concerns before Europe cuts expected Russian imports.
Brent crude futures fell $1.02, or 1.1%, to $95.94 a barrel at 0635 GMT after rising 1.3% in the previous session. West Texas Intermediate (WTI) crude futures fell $1.24, or 1.4%, to $87.84 a barrel.
Still, both benchmark oil contracts are on their way to weekly gains with Brent heading for gains of more than 2% and WTI more than 3%.
Friday’s declines came after Chinese cities on Thursday doubled their COVID-19 restriction slats, closed buildings, locked down zones, and distressed millions in a fight to curb the spreading epidemic.
China reported 1,506 new COVID-19 infections on October 27, with 1,264 new cases the day before, the National Health Commission said on Friday.
Policymakers said the European Central Bank (ECB) could raise its inflation forecasts. The International Monetary Fund (IMF) expects China’s growth to slow to 3.2% this year, down 1.2 percentage points from its April projection after an 8.1% increase in 2021.
The oil market has benefited from the weaker dollar and hopes of a strong recovery in the Chinese economy, but now the focus is shifting to recession risks, which dragged down forecasts for the crude demand outlook for the remainder of the year.
But analysts said the strong recovery in U.S. gross domestic product in the third quarter reported on Thursday highlighted the resilience of the world’s largest economy and oil consumer.
Given the low global inventories, market volatility is likely to be on the upside as European sanctions on Russian crude come into effect in December and Chinese demand is rising.
Brent’s increased premium over WTI is supported by signs of increased refinery activity in China, Europe’s hunger for crude ahead of the Russian oil embargo, and pending supply disruptions by the Organization of the Petroleum Exporting Countries (OPEC) and its allies.
The market remains wary of approaching deadlines for purchases of Russian crude from Europe before sanctions begin on December 5.
