China's a 'big wild card' for oil prices as the hit from surging COVID cases has yet to be seen, energy expert Dan Yergin says

• China is a "big wild card" for oil as the lifting of COVID curbs sends cases soaring, Dan Yergin said.
• Nobody knows how bad the impact of so many infections will be on the economy, the energy expert said.

China is "one big wild card on the upside that hangs over the oil market," energy expert Daniel Yergin has said, as the country lifts its strict zero-COVID restrictions after nearly three years of lockdowns.

After a wave of public protests, Beijing made an abrupt U-turn on its policy and relaxed curbs to contain the spread of the coronavirus. Those restrictions on businesses and people took a toll on economy activity in the country — but so could the easing of the measures, Yergin said.

"China is clearly reopening, but the reopening comes with disruption," he said, according to a Nikkei Asia report Tuesday.

"No one knows how bad the impact of COVID will be on China, and the degree to which — although the lockdown has been lifted — the economy will still be depressed because there are so many infections," the S&P Global vice chairman added.

Factory activity in the country shrank in December, a Caixin PMI survey showed Tuesday. The decline came alongside a big jump in new coronavirus cases, which scientists believe are reaching 1 million a day compared with the official figure of 4,000, The Guardian reported.

Manufacturing powerhouse China is typically a huge buyer of oil, and any fall in economic activity will mean a cut in demand for crude.

Tensions between China and Taiwan also stand to impact oil prices, according to Yergin.

If a crisis unfolds, "it would send huge shock waves through the world economy and create a panicky situation in the global energy market," Yergin said, adding that crude prices would "go up dramatically."

Crude oil prices have trended downward since reaching above $120 a barrel in June thanks to the fallout from Russia's war on Ukraine. But they have revived somewhat recent weeks, adding about 13% in December as investors grew hopeful for a bounceback in Chinese demand.

Brent crude, the international benchmark, were down 3% at $83.26 a barrel at last check Tuesday. US benchmark WTI crude futures was also 3% lower at $77.83 a barrel.