For a third day oil fell, off weakened Chinese demand outlook as well as rising US inventories, which were revealed in a new industry report.
After falling 4% over the first two days of the week, West Texas Intermediate slid down toward $88 per barrel. In China, Covid infections continued to advance in the face of the strict lockdowns and harsh containment measures that are routinely employed as part of the nation’s “zero-Covid” strategy. In Beijing, cases hit a five-month high, as 78 new infections were identified just on Wednesday.
The American Petroleum Institute released a report showing US oil inventories increased by 5.61 million barrels last week, according to sources which were familiar with the figures. The report will also show gasoline inventories will have increased as well. Later Wednesday, additional data will come in from the Energy Information Administration.
In October, crude has rebounded following OPEC’s production cut of 2 million barrels per day at their last meeting. In addition, tougher limits on the sale of Russian oil is expected to apply additional upward pressure on prices going forward. Despite fears of weakness in the futures market of late, Dated Brent, the most important benchmark in the world, was up over $100 per barrel this week, the first time it hit that mark since August.
Charu Chanana, market strategist at Saxo Capital Markets Pte. said, “A fresh surge in China’s Covid cases further sparked concerns on how soon China will part ways with its Zero Covid policy. While China’s virus restrictions, along with a large build in US oil inventories, are weighing on prices, there still remains structural supply concerns which are supportive instead.”
Looing in the background are the US midterm elections. It is expected Republicans will take control of either the House, or Senate, or perhaps both. That could significantly hamstring the White House’s ability to enact their agenda, which could affect the value of the dollar, which would carry on to affect commodity prices, including oil.
In other news, the Energy Information Administration cut the 2023 forecast for oil output, which traders are taking as a sign that the US shale fields will not be able to ramp up production fast enough to significantly affect prices going forward. Next year’s output was estimated at 12.31 million barrels per day, according to the EIA’s report.
The Daily Financial Trends