LONDON (Reuters) – Oil fell sharply on Wednesday after collapsing in the previous session, weighed down by concerns over weak demand amid the state of the global economy and China’s rising COVID cases.
Brent futures were down $2.39 to $79.71 a barrel by 1309 GMT, down 2.9%. US crude fell $2.20, or 2.9%, to $74.73 a barrel.
Both benchmarks fell more than 4% on Tuesday, with Brent suffering its biggest one-day drop in more than three months.
“Concerns about the state of the global economy are at the center of traders’ minds and will remain so for the foreseeable future,” said Stephen Brennock, analyst at PVM Oil.
The Chinese government also increased export quotas for refined oil products in the first batch for 2023, signaling expectations of weak domestic demand. Continue reading
Leading oil exporter Saudi Arabia could further cut prices for its flagship Asian crude Arab Light in February after setting a 10-month low for the month as concerns over oversupply continued to cloud the market. Continue reading
The head of the International Monetary Fund warned that much of the global economy would face a tough 2023 as the main engines of global growth – the United States, Europe and China – would all experience flagging activity. Continue reading
The Fed also hiked rates by 50 basis points (bps) in December after four consecutive hikes of 75 bps each. If the Fed ramps up its rate hikes, it could slow the economy and hurt fuel economy.
Lending some support to oil, the dollar weakened on Wednesday after posting large gains in the previous session. A weaker dollar typically increases demand for oil as dollar-denominated commodities become cheaper for holders of other currencies.
U.S. crude stockpiles are likely to have risen by 2.2 million barrels, with distillate stockpiles expected to fall, a preliminary Reuters poll showed on Monday.
Industry group American Petroleum Institute is due to release data on U.S. crude oil inventories at 4:30 p.m. EDT (2030 GMT) on Wednesday. The Energy Information Administration, the US Department of Energy’s statistical arm, will release its own figures at 10:30 a.m. (14:30 GMT) on Thursday.
Bank UBS expects Brent prices to rise to $110 a barrel and WTI prices to $107 by 2023.
Additional reporting by Muyu Xu, editor of Louise Heavens
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