Oil slips on tightening COVID-19 curbs, especially in China

By Sonali Paul
MELBOURNE, Jan 28 (Reuters) - Oil prices slid in early trade
on Thursday on fresh worries about weakened fuel demand, after
England clamped down on travel and China, the world's
second-largest oil consumer, also sought to limit Lunar New Year
trips to stem a surge in COVID-19 cases.
U.S. West Texas Intermediate (WTI) crude CLc1 futures fell
12 cents, or 0.1%, to $52.72 a barrel at 0228 GMT, erasing some
of Wednesday's gain.
Brent crude LCOc1 futures fell 16 cents, or 0.3%, to
$55.65 a barrel, after losing 10 cents on Wednesday.
"It looks like the market's really paying attention to some
of the demand concerns. The one which has really taken over
moreso than others is what's going on in China," said
Commonwealth Bank Commodities Analyst Vivek Dhar.
The market had been supported earlier this week by a
surprisingly large decline in U.S. crude stockpiles in the week
to Jan. 22, which analysts said was due to a pick up in U.S.
crude exports and a drop in imports. EIA/S
Oil inventories dropped by 9.9 million barrels, the most
since July, to their lowest since March, the Energy Information
Administration reported on Wednesday. Gasoline stockpiles rose
and distillate fuel inventories declined amid slightly lower
refinery runs.
But attention is now turning back to demand concerns amid a
rise in COVID-19 infections with contagious new variants.
"The economic backdrop remains uncertain as governments
struggle to fight off the spread of COVID-19," ANZ Research said
in a note.
England, in lockdown since Jan. 4, on Wednesday clamped down
on travel, requiring people arriving from high-risk COVID-19
countries to quarantine for 10 days and barring outbound trips
for all but exceptional reasons. More concerning is China, analysts said, whose increasing
fuel demand supported the market last year. The country is now
facing a rise in coronavirus cases as it heads into what is
normally the busiest travel season of the year, the Lunar New
Year holiday.
The Chinese Ministry of Transport has forecast the number of
trips that will be taken will be up 15% from last year, when the
virus was raging, but down 40% from 2019.
Flights out of Shanghai are already being cancelled, Dhar
said.
"China -- they were the ones supporting the market. If you
have issues forming in China, that really puts a brake on the
demand story for now," he said.