Oil falls further as concerns grow over global economy, China's COVID
cases
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[January 04, 2023] By
Ahmad Ghaddar
LONDON (Reuters) -Oil fell sharply on Wednesday after slumping in the
previous session, weighed down by concerns about weak demand due to the
state of the global economy and China's rising COVID cases.
Brent futures fell $2.39 to $79.71 a barrel, a 2.9% loss, by 1309 GMT.
U.S. crude dropped $2.20, or 2.9%, to $74.73 per barrel.
Both benchmarks plunged more than 4% on Tuesday, with Brent suffering
its biggest one-day loss in more than three months.
"Worries about the state of the global economy are front and centre of
traders’ minds and will remain so for the foreseeable future," PVM Oil
analyst Stephen Brennock said.
The Chinese government also increased export quotas for refined oil
products in the first batch for 2023, signalling expectations of poor
domestic demand.
Top oil exporter Saudi Arabia may further cut the prices for its
flagship Arab Light crude grade to Asia in February, after they were set
at a 10-month low for this month, as concerns of oversupply continued to
cloud the market.
The head of the International Monetary Fund warned that much of the
global economy would see a tough year in 2023 as the main engines of
global growth - the United States, Europe and China - were all
experience weakening activity.x
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A view shows Chao Xing tanker at the
crude oil terminal Kozmino on the shore of Nakhodka Bay near the
port city of Nakhodka, Russia August 12, 2022. REUTERS/Tatiana Meel
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The Fed also raised interest rates by 50 basis points (bps) in
December after four consecutive increases of 75 bps each. If the Fed
intensifies its rate hikes, that could slow the economy and hamper
fuel consumption.
Lending oil some support, the dollar weakened on Wednesday after
posting big gains in the previous session. A weaker dollar typically
boosts demand for oil as dollar-denominated commodities become
cheaper for holders of other currencies.
U.S. crude oil stockpiles likely rose 2.2 million barrels, with
distillate inventories expected down, a preliminary Reuters poll
showed on Monday. [EIA/S]
Industry group American Petroleum Institute is due to release data
on U.S. crude inventories at 4.30 p.m. EDT (2030 GMT) on Wednesday.
The Energy Information Administration, the statistical arm of the
U.S. Department of Energy, will release its own figures at 10.30
a.m. (1430 GMT) on Thursday.
Bank UBS expects Brent prices to rise to $110 a barrel and WTI to
rise to $107 in 2023.
(Additional reporting by by Muyu Xu, Editing by Louise Heavens)
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