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2021-01-19 05:39:06

By Dwaipayan

The resurgence of Covid-19 in China has led to lockdowns and calls for citizens not to travel during the upcoming Lunar New Years holidays, stoking concern that oil and fuel demand will take a near-term hit.

People are being encouraged to remain in their cities to prevent the spread of the coronavirus, with some provinces offering cash incentives, or hongbao, and food vouchers to those who choose to stay home. China State Railway Group Co. cut its estimate for the number of travelers over the festive period to 296 million from 407 million amid low train ticket bookings, Xinhua news agency reported. While it’s a significant drop, it’s still higher than 2020.

Uncertainties about Chinese demand are starting to flow through to the physical oil market. Some buyers are sitting on the sidelines and that’s contributing to a slump in spot trading sentiment, according to traders, with Russian Far East and Middle Eastern grades selling at narrower premiums to benchmarks.

Hundreds of millions of Chinese typically travel during the Lunar New Year period, crowding trains and airports as they return to their hometowns for the festivities. The Ministry of Transport expects a significant drop in travelers over the 40-day period from Jan. 28 to March 8, with commuters shunning long-distance bus rides in favor of other options such as private cars.

China was the only major economy to expand last year after the nation largely contained the pandemic within its own borders following strict lockdowns and sweeping testing programs. The latest Covid-19 outbreak is the largest in months and started in the province of Hebei that surrounds Beijing.