Categories: Economic News

Oil prices fall, but weekly gain expected on supply concerns

Aerial view of the Phillips 66 oil refinery in the United States.

Tayfun Coskun | Anadolu Agency | Getty Images

Oil prices fell about 1% on Friday after top crude importer China extended its COVID-19 curbs, although crude benchmarks were poised for a weekly gain on concerns about surprisingly strong supply and economic data.

Brent futures fell 89 cents, or 0.92%, to settle at $96.07 a barrel. U.S. West Texas Intermediate (WTI) crude fell 88 cents, or 0.99%, to $88.20.

US gasoline futures fell about 3%, while US diesel futures rose about 5% to their highest since mid-June.

“Diesel (was) still (the) strongest component of the complex (with) shorts squeezed out of the November contract ahead of Monday’s expiration,” said analysts at energy consultancy Ritterbusch and Associates.

For the week, Brent was up around 2% and WTI was up around 3%.

Chinese cities stepped up their COVID-19 crackdown on Thursday, sealing buildings and locking down districts after China recorded 1,506 new COVID infections on Oct. 27, the National Health Commission said, compared with 1,264 new cases a day before.

The International Monetary Fund expects China’s growth to slow to 3.2% this year, down 1.2 points from its April projection, after an 8.1% rise in 2021.

“It’s hard to argue for a pick-up in China’s crude purchases given the context of uncertainty about its zero-covid policy,” said PVM Oil analyst Stephen Brennock.

PetroChina said China’s demand for refined fuel and natural gas was expected to grow year-on-year in the fourth quarter alongside an expected economic recovery as Beijing implements more stimulus policy.

Economic strength in two major economies capped oil’s losses.

Data on Thursday showed a strong rebound in US gross domestic product (GDP) in the third quarter, demonstrating the resilience of the economy and the world’s biggest oil consumer.

Germany’s economy also unexpectedly grew in the third quarter, data showed on Friday, as Europe’s biggest economy kept recession at bay despite concerns about high inflation and energy supplies ahead of the looming ban European Union of Russian crude oil imports.

“The market remains wary of looming deadlines for European purchases of Russian crude before sanctions kick in on December 5,” ANZ Research analysts said in a note.

Global oil and gas giants including Exxon Mobil, Chevron and Equinor posted big profits in the third quarter, fueling criticism from consumer groups in the United States and Europe. US President Joe Biden has told oil companies that they are not doing enough to reduce energy costs.

U.S. oil and natural gas rigs fell this week, but in October they did not post their first monthly increase since July, according to energy services firm Baker Hughes Co.

The Organization of the Petroleum Exporting Countries (OPEC) is likely to maintain its view that global oil demand will rise for another decade.


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