Crude prices are down approximately 10% in just two days of trading since the beginning of 2023 after ending 2022 up nearly 7%, amid concerns about a global recession and the worsening Covid situation in China, the top oil importer.

"Oil prices have tumbled … [on] the uncertainty [in] near-term economic prospects for China amid surging COVID cases," said Ed Moya, an analyst at online trading platform OANDA.

"While reliable data is seemingly hard to come by, the view appears to be that there'll be significant disruption in the coming months."  

On Wednesday, the New York-traded West Texas Intermediate crude (WTI) settled trade down $4.09, or 5.3%, at $72.84 per barrel after hitting a three-week low of $72.77 during the session.

London-traded Brent crude settled down $4.26, or 5.2%, at $77.84 per barrel after dropping to a three-week low of $77.74 earlier on Wednesday.

Brent, the global crude benchmark, is down 9.4% from just two days of trading this year after ending 2022 up 10.5%.  

Since the new year started, fears about a global recession have intensified, pummeling crude prices as China faces increased challenges in containing the spread of coronavirus in the country.

Hundreds of millions of people in China are estimated to be at risk from Covid infections before herd immunity is achieved in the second largest economy in the world. Thus, the country's zeal to go from a zero-Covid policy to one where officials are currently exhorting the people to announce a "final victory" over the virus has sounded an alarm across markets.

Concerns over China’s actions have been highlighted after the International Monetary Fund (IMF) started the new year with a tough warning that the country as well as the United States and Europe were all in slowdown mode.

The manufacturing activity in China shrank for a fifth straight month in December, according to data on Tuesday, as the country struggled with an unprecedented rise in Covid cases.  

China has also raised export quotas for refined oil products in the new year's first batch, signaling expectations of poor domestic demand.  

According to media reports, adding to the market’s bearishness were signs that Saudi Arabia could further cut prices to Asia for its flagship Arab Light crude grade in February after the pricing for that hit a 10-month low this month, reflecting concerns of oversupply.