Oil prices edged lower on Tuesday as rising COVID-19 cases in China heightened fears of lower fuel consumption from the world’s top crude importer.
Brent crude futures were down 13 cents to $93.01 a barrel at 11:26 a.m. EST, while U.S. West Texas Intermediate crude fell 1 cent to $85.86.
Investors cheered China’s announcements last week that it would reduce the impact of a strict zero-COVID policy to spur economic activity and energy demand, but analysts said lockdowns and surging case numbers remained a downside risk.
“Rising COVID cases in Beijing and in other cities served us with a reminder that a change in the trajectory of economic and oil demand growth in the world’s biggest oil importer is anything but imminent,” said Tamas Varga of oil broker PVM.
The country’s COVID cases rose further on Tuesday, including in the capital Beijing, and the country’s factory output growth slowed.
Investment bank JPMorgan cut its quarterly and full-year forecasts for economic growth in China. The Organization of the Petroleum Exporting Countries (OPEC) cut its 2022 global oil demand growth forecast for a fifth time since April, citing mounting economic challenges including high inflation and rising interest rates.
Supply concerns limited declines for oil prices.
A European Union ban on seaborne Russian crude, set to start on Dec. 5, means that 1.1 million barrels per day (bpd) must be replaced, the International Energy Agency said on Tuesday.
“When you look at what we saw from the IEA about global oil inventories, that should be very bullish,” said Phil Flynn, an analyst at Price Futures Group.
Still, the IEA forecast that a gloomy economic outlook will put global oil use on track to contract by nearly a quarter million bpd in the fourth quarter of 2022 year on year, with demand growth slowing to 1.6 million bpd in 2023 from 2.1 million bpd this year.
Offering some support to prices, U.S. stock index futures strengthened in the wake of cooler than expected inflation data released on Tuesday.
In U.S. supply, crude oil stocks are expected to have dropped by about 300,000 barrels in the week to Nov. 11, a Reuters poll showed on Monday ahead of reports from the American Petroleum Institute due at 4:30 p.m. ET (2130 GMT) on Tuesday.
Source: Reuters (Reporting by Rowena Edwards in London Additional reporting by Florence Tan and Isabel Kua in Singapore Editing by David Goodman, Mark Potter and David Gregorio)