Oil declines on weak China demand outlook, higher stockpiles

Oil fell amid a challenging Chinese demand outlook and after an industry report pointed to rising US inventories.

West Texas Intermediate lost as much as two per cent and traded near $88 a barrel. Swelling virus outbreaks in China show the strain its Covid Zero strategy is facing, with cases in Beijing hitting the highest in more than five months despite the nation’s program of lockdowns and mass testing. 

Wider markets fluctuated as the US midterm elections offered up a mixed result.

In the US, the industry-funded American Petroleum Institute reported oil inventories increased by 5.61 million barrels last week, according to people familiar with the figures, which also showed higher gasoline stockpiles. Official data from the Energy Information Administration follow later Wednesday. 

Crude has rebounded of late, with Brent futures rallying toward $100 earlier this week, after the Organization of Petroleum Exporting Countries and its allies agreed to cut supplies. The International Energy Agency said on Wednesday that the group may need to rethink its plans as they are damaging emerging economies. The world’s main physical oil benchmark, Dated Brent, rallied back above $100 this week. 

“For now, the market worries about fresh lockdowns hurting sentiment and demand, and together with the API storage report it has triggered some light selling,” said Ole Hansen, head of commodities strategy at Saxo Bank. “Especially after the failed attempt to break higher through recent highs earlier in the week.”

Prices

  • WTI for December delivery fell 0.9 per cent to $88.09 a barrel at 8:06 a.m. in New York.
  • Brent for January settlement dipped one per cent to $94.43 a barrel.

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