As China grapples with a surge of Covid-19 cases, a closely watched-gauge of Asian oil-demand has fallen to a seven-month low.

On Thursday, the premium of Oman futures over Dubai swaps dropped beneath $1 per barrel on the Dubai Mercantile Exchange. So far this month it has dropped about 80%.

In November, global oil markets have weakened as a whole raft of widely-watched metrics have been pointing to a loosening market and lower prices, driving futures down. The prompt spread for both European benchmark Brent crude and US benchmark West Texas Intermediate have fallen into contango, a bearish pricing pattern which points to plentiful near-term supply. Amid the flurry of red flags, Brent futures have fallen this week to the cheapest prices since January.

Hopes among traders for a recovery in China are dwindling daily as Covid-19 levels continue to rise, hitting record levels. Officials are now stepping up containment measures and movement restrictions. A major reduction in Chinese demand due to more lockdowns will loosen supplies globally and drive prices down.

Since the invasion of Ukraine, the Oman futures-Dubai swaps gauge has mostly commanded multi-dollar premiums, only slipping below $1 for a single day in April. In March it rose as high as $15, as buyers began to avoid Russian crude, which increased demand for Mideast oil, driving the premium up.

As the physical trading for January-loaded cargoes this month mostly wrapped up, there has been a sharp decline in spot premiums for key Mideast grades. Even though China’s Rongsheng Petrochemical Co. bought roughly 7 million barrels in the middle of the month, it did not appreciably raise the sentiment, according to traders.

At the same time, intermonth Dubai swaps, another physical market indicator that traders watch closely, flipped into contango Friday, which would signal bearishness for December through April. Prior to this week, it last entered contango in April of 2021.