Oil extends drop in thin trading as fears over Covid wave mount

Oil extended losses on concerns that China’s rapid dismantling of its Covid Zero policy could lead to a surge in cases across the world.

West Texas Intermediate dropped toward $78 a barrel after closing down 0.7 per cent on Wednesday. The US will require air passengers from China to show negative virus tests, while Italy will begin testing all arrivals from the Asian nation. That’s overshadowing optimism over a longer-term demand recovery in China.

Crude is heading for the first back-to-back quarterly loss since 2019 after a volatile year that saw prices surge after Russia-Ukraine crisis before retreating as concerns over a global economic slowdown mounted. A lack of liquidity has exacerbated price swings this year.

Meanwhile, the industry-funded American Petroleum Institute reported US commercial crude inventories fell by 1.3 million barrels last week, according to Dow Jones. Stockpiles at the storage hub at Cushing, Oklahoma, also shrunk, although gasoline and distillate supplies expanded.