©Health & Fitness Journal. FILE PHOTO: Pump jacks work at sunset in Midland, Texas, U.S. February 11, 2019. REUTERS/Nick Oxford
By Florence Tan and Isabel Kua
SINGAPORE (Health & Fitness Journal) – Oil prices slid on Tuesday, as rising COVID-19 cases in China sparked fears over lower fuel consumption by the world’s largest crude oil importer and after OPEC cut its 2022 global demand forecast.
Futures fell 27 cents, or 0.3%, to $92.87 a barrel by 0416 GMT after settling down 3% on Monday. US West Texas Intermediate crude was at $85.37 a barrel, down 50 cents, or 0.6%, after falling 3.5% in the previous session.
While investors hailed China’s announcements last week that it would lessen the impact of a strict zero-COVID policy to boost economic activity and energy demand, analysts said lockdowns and rising case numbers remain a key downside risk.
“Rolling lockdowns in densely populated areas in China are penalizing mobility and oil demand even more than economic activity,” said Stephen Innes, managing partner at SPI Asset Management, in a statement.
The country’s factory output growth slowed, retail sales fell and real estate slumped further in October, the latest sign the world’s second-largest economy is losing momentum as it grapples with protracted COVID restrictions and a housing downturn .
Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) lowered its forecast for global oil demand growth in 2022 for the fifth time since April, citing mounting economic challenges including high inflation and rising interest rates.
This comes after the International Monetary Fund said on Sunday the global economic outlook had turned bleaker than last month’s forecast, citing a steady deterioration in purchasing manager surveys in recent months.
“The market is currently defying looming supply risks, despite expectations that the recent demand downgrade could negatively impact OPEC oil production,” analysts at ANZ Research said in a statement, citing upcoming European Union sanctions on Russian oil exports.
The EU embargo on Russian oil in retaliation for Russia’s invasion of Ukraine is set to begin on December 5. The ban will be followed by an import ban on oil products in February.
Oil inventories were expected to fall by about 300,000 barrels in the week ending November 11, a preliminary Health & Fitness Journal poll showed on Monday.
Elsewhere, oil production in the Permian Basin will hit another record 5.499 million barrels per day (bpd) in December, the US Energy Information Administration (EIA) said in its monthly productivity report on Monday.
However, aging shale regions are showing weaker production per well, resulting in total U.S. shale crude oil production up just 91,000 bpd to 9.191 million bpd despite a December price hike, the EIA said.