China is registering near-record numbers of new Covid infections daily—close to the April 2022 peak when the financial center Shanghai was under lockdown for weeks—likely depressing fuel demand as 48 Chinese cities currently have some form of restrictions on movements.
Shanghai is again restricting some movement, with travelers to the city barred from most public places for five days after their arrival.
Per CNBC calculations of Wind Information data, mainland China has seen daily new Covid cases rising to more than 28,000, close to the levels from the Shanghai lockdown that began in April, dragging oil prices down.
Economic growth is also set to suffer further with the increased restrictions, which come less than two weeks after Chinese authorities signaled an easing of part of the restrictions. China announced earlier this month a more targeted approach to its zero-Covid policy still in place, and said it would reduce quarantine times for inbound passengers and close contacts of Covid-infected people while close contacts of close contacts would no longer be traced.
According to analysts at Nomura, as of Monday, almost 20% of China’s economy was suffering from the latest Covid restrictions.
Soaring Covid cases hamper the zero-Covid policy, and if China still wants to achieve zero-Covid, it may have to resort to another lockdown like the weeks-long strict curbs on movement in Shanghai this spring, according to Macquarie’s Chief China Economist Larry Hu.
“China might have already passed the point of no return, as it’s unlikely to achieve zero Covid again without another Shanghai-style hard lockdown,” Hu wrote in a Tuesday report cited by CNBC.
China’s rising Covid cases and the return of restrictions have weighed on oil prices this month as the market fears another slowdown in Chinese economic growth and fuel demand, on top of global recession fears.
By Tsvetana Paraskova for Oilprice.com
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