Oil Nosedives On WHO Suspicion That China Death Rate Is "Under-Represented"

by Ship & Bunker News Team
Wednesday January 4, 2023

Oil prices on Wednesday took another nosedive – this time by over 5 percent - due to worries over escalating Covid infections in China and their potential impact on global demand.

Brent plummeted $4.26 or 5.2 percent to settle at $77.84, while West Texas Intermediate settled down $4.09 or 5.3 percent to $72.84 per barrel.

If the World Health Organization is to be believed, China has under-represented how many people have died in its recent outbreak following government’s relaxation of its zero-tolerance infection policies.

WHO expressed worries rather than convictions regarding China's method of tally, questioning the country's report of  22 Covid deaths since December - and this was enough to panic traders.

Bob Yawger, director of energy futures at Mizuho, said, “Crude oil is trading lower on concerns around China Covid-19 and the Fed forcing a global recession ... both demand destruction events.”

With oversupply now a concern for analysts who mere weeks ago fretted over the consequences of a tight global market, Saudi Arabia stated it could cut prices for its flagship Arab Light crude grade to Asia in February, in addition to the commodity having been set at a 10-month low for January.

Much of this was anticipated by insiders: of January, Rotterdam-based energy analyst Gerald Jansen noted that “the decision to cut the OSPs was widely expected, after all the Dubai cash/futures spread narrowed to $2.75 per barrel last month, an almost $2 per barrel decrease from October.

“In doing so, the Middle Eastern benchmark grade has followed in the footsteps of Brent and WTI, both of which have flipped into contango in the past couple of weeks.”

But not everyone bought into the rapidly unfolding gloomy narrative on Wednesday: Amrita Sen, director of research and co-founder of Energy Aspects, told Bloomberg television that she expects oil to rise above $100 in the second half of this year when demand returns to China.