Oil slumps on China COVID-19 outbreak, recession fears

Oil prices extended their decline on Monday as reported COVID-19 deaths and tighter restrictions in China met rising fears a hawkish tilt from the US Federal Reserve will tip the global economy into recession in 2023.

“We saw some optimism just after the National People’s Congress with the quarantine rules easing. But the rise of cases reiterates just how difficult the short term will be.”Mr Hynes cited a congestion index of the country’s 15 largest cities showing a 2.3 per cent drop in week-on-week traffic in the seven days to November 16.

China analysts had hoped the moves signalled that policymakers had turned their attention to repairing the domestic economyHowever, Chinese stocks slid and the yuan weakened on Monday as a string of reported COVID-19 deaths and tighter restrictions in some districts sapped optimism. Speaking on National Australia Bank’s Morning Call, Tapas Strickland expects to see a near-term tightening of restrictions, noting that older residents are under-vaccinated compared to the US and more vulnerable to the fresh wave of infections.

“It feels like the $US90 per barrel mark is their line in the sand. If things did deteriorate in the short term, I certainly wouldn’t put it past them that we would see another cut.”Despite the resurfacing of demand concerns, Mr Hynes is optimistic about the longer-term outlook for oil prices, forecasting crude oil prices around $US115 a barrel in the first half of 2023.

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