Oil prices have fallen further this week as fears of a decline in Chinese oil demand continue due to a spike in COVID cases across key Chinese cities.Oil prices have fallen further this week as fears of a decline in Chinese oil demand continue due to a spike in COVID cases across key Chinese cities.

Last week, the market had latched onto hopes that China might be moving toward relaxing its COVID-19 restrictions, but over the weekend health officials said they would stick to their "dynamic-clearing" approach to new infections.

COVID-19 cases in Guangzhou and other Chinese cities have surged, with millions of residents of the global manufacturing hub being required to have COVID-19 tests on Wednesday.

"With that (China reopening) narrative getting pushed back, coupled with a considerable build on U.S. inventory data, implying dimming U.S. demand, the recessionary crews are back out in full force this morning in Asia," Stephen Innes, managing partner at SPI Asset Management, said in a note.

A stronger U.S. dollar, which makes oil more expensive for buyers in other currencies, also weighed on crude prices. The dollar advanced against several major currencies, as the results of the U.S. midterm elections on Tuesday dispelled notions of a resounding Republican victory.

Meanwhile, the supply chain remains fragile, compounded by the impending European Union ban on Russian crude imports on December 5th and Russian oil products by February 5th, in retaliation for Russia's invasion of Ukraine.

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