Oil Prices Slip After China Cuts Import Quotas

Oil prices eased on Thursday after the world’s top importer China cut the first batch of crude import allocations for 2022, offsetting the impact of U.S. data showing fuel demand had held up despite soaring Omicron coronavirus infections.

Brent crude futures fell 27 cents, or 0.3%, to $78.96 a barrel at 1322 GMT. U.S. West Texas Intermediate (WTI) crude futures slid 36 cents, or 0.5%, to $76.20 a barrel after six straight sessions of gains. Oil prices pared earlier gains after China, the world’s top crude importer, lowered the first batch of 2022 import quotas to mostly independent refiners by 11%.

“Market sentiment weakened on worries that the Chinese government could take stricter actions against the teapots,” a Singapore-based analyst said, referring to the independent refiners.

Global oil prices have rebounded by between 50% and 60% in 2021 as fuel demand roared back to near pre-pandemic levels and deep production cuts by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) for most of the year erased a supply glut. read more

U.S. Energy Information Administration data on Wednesday showed crude oil inventories fell by 3.6 million barrels in the week to Dec. 24, which was more than analysts polled by Reuters had expected. Gasoline and distillate inventories also fell, versus analysts’ forecasts for builds, indicating demand remained strong despite record COVID-19 cases in the United States.

Oil prices also drew support from steps taken by governments to limit the impact of record high COVID-19 cases on economic growth, such as easing testing rules. read more

OPEC+ will meet on Jan. 4 to decide whether to continue increasing output in February. Saudi Arabia’s King Salman said on Wednesday the OPEC+ production agreement was needed for oil market stability and that producers must comply with the pact. read more

Iraq said it would support sticking to existing OPEC+ policies to raise output by a combined 400,000 bpd in February. Shell said it had resumed exports of Forcados oil in Nigeria, easing one of three major global outages which also include Ecuador and Libya. read more

Crude futures slipped on Monday as concerns over slowing global growth outweighed the prospect of tightening supply after talks among key producers to raise output in coming months stalled.

Brent crude for September fell 0.52% to settle at $75.16 per barrel while U.S. West Texas Intermediate crude for August settled at $74.10 a barrel, for a loss of 0.62%.

Both benchmarks fell around 1% last week but still hover near highs last reached in October 2018.

The spread of coronavirus variants and unequal access to vaccines threaten the global economic recovery, finance chiefs of the G20 large economies warned on Saturday.

A Reuters tally of new COVID-19 infections shows them rising in 69 countries, with the daily rate pointing upwards since late-June and now hitting 478,000.

“The market has been a bit negative as of late amid the growing sense that the latest OPEC+ impasse could be a precursor to a pump-and-grab scenario, meaning a lot more oil potentially gets put on the market,” said Stephen Brennock of oil broker PVM.

Oil prices slumped last Tuesday after the Organization of the Petroleum Exporting Countries and their allies, a group known as OPEC+, did not reach an agreement to increase output from August. This was because the United Arab Emirates rejected a proposed eight-month extension to OPEC+ output curbs.

The world’s top oil exporter Saudi Arabia met full contractual demand for crude oil from five buyers in August, but turned down at least two requests for additional volumes.

Front-month WTI crude futures posted their sixth weekly gain last week after a bullish report from the U.S. Energy Information Administration showed U.S. crude and gasoline stocks fell while gasoline demand reached its highest since 2019.

In response to higher oil prices, U.S. energy firms added oil and natural gas rigs for a second week in a row, data from Baker Hughes showed.

By : Dmitry Zhdannikov, Sonali Paul and Florence Tan

Source: Oil prices slip after China cuts import quotas | Reuters

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