• Oil prices have declined as China’s epidemic concerns have resurged.
• Weak China Trade Balance data have dented the sentiments of market participants.
• More optimism in Fed’s rate slowdown chatter may bring oil bulls back in power.

West Texas Intermediate (WTI), futures on NYMEX, dropped to near $90.20 in the Tokyo session. The oil prices have delivered a marginal rebound to $91.00, but still are prone to more downside as China has tightened its lockdown curbs further due to a resurgence in Covid-19 cases.

The Chinese economy has faced its worst outbreak in the past six months and the administration is committed to maintaining zero Covid-19 to bring prosperity. The continuation of restrictions on the movement of men, materials, and machines has raised concerns over the extent of manufacturing and related activities.

A decline in the scale of economic activities may trim the oil demand dramatically. Investors should be aware of the fact that China is a leading importer of oil and vulnerable oil demand in China will have a significant impact on oil prices.

In early Asia, weak China Trade Balance data has also raised demand concerns. The exports rose by 7.0% last month vs. 14.8% expected and 10.7% previous while, imports climbed by 6.8% vs. 6.0% expected and 5.2% the prior release.

Apart from that, chances of a slowdown in the current pace of rates hiking by the Federal Reserve (Fed) are buzzing now. An occurrence of the same could bring back optimism in oil prices as global demand would start railing on its track. Firms will focus on expansion plans and oil demand will eventually accelerate.

Meanwhile, chatters over further sanctions on Russia’s oil release are gaining heat. Rally in oil prices could resume as more sanctions on Russia will trigger the situation of a tight oil market.