Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Oil prices slump again, hit by demand concerns

Published 31/08/2022, 10:31 am
Updated 01/09/2022, 05:10 am
© Reuters. FILE PHOTO: Crude oil storage tanks are seen from above at the Cushing oil hub, in Cushing, Oklahoma, U.S., March 24, 2016.    REUTERS/Nick Oxford

© Reuters. FILE PHOTO: Crude oil storage tanks are seen from above at the Cushing oil hub, in Cushing, Oklahoma, U.S., March 24, 2016. REUTERS/Nick Oxford

By David Gaffen

NEW YORK (Reuters) -Oil prices extended their slide on Wednesday, led lower by worries that the global economy would slow further with renewed restrictions to curb COVID-19 in China.

Brent crude futures for October due to expire on Wednesday, settled at $96.49, down $2.82 a barrel, or 2.8%. The more active November contract lost $2.20 to $95.64 a barrel. U.S. West Texas Intermediate (WTI) crude futures ended down $2.09, or 2.3%, at $89.55 a barrel.

"The weakness coming out of China has played a significant role" in lowering prices, said Harry Altham, energy analyst for EMEA & Asia at StoneX Group in London. "There are fears of demand destruction across the West as interest rates rise and inflation concerns grip Western economies."

The market has been primarily concerned with inadequate supply in the months following Russia's invasion of Ukraine and as OPEC struggled to increase output. That drove near-term contracts to a sharp premium over later-dated futures earlier this year, but that pattern has reversed somewhat as output has increased.

Both OPEC and the United States saw production hit its highest levels since the early days of the coronavirus pandemic, with OPEC's output hitting 29.6 million barrels per day (bpd) in the most recent month, according to a Reuters survey, while U.S. output rose to 11.82 million bpd in June. Both are at their highest levels since April 2020.

"The fear that there’s a slowdown here and then also the potential here for some additional supply increases coming down the pike is having some pressure on the market," said Mike Sabo, market strategist at RJO Futures in Chicago.

The Joint Technical Committee of the Organization of the Petroleum Exporting Countries (OPEC) and allies, together called OPEC+, said it now sees an oil surplus this year of 400,000 bpd, up 100,000 bpd from its forecast a month earlier.

Some OPEC+ members have called for cuts. The group is next due to meet on Sept. 5 amid weakening demand in Asia that spurred Saudi Arabia to lower its official selling prices to that region.

U.S. crude stocks fell by 3.3 million barrels, the U.S. Energy Information Administration said Wednesday, while gasoline stocks were down 1.2 million barrels. [EIA/S]

© Reuters. FILE PHOTO: Crude oil storage tanks are seen from above at the Cushing oil hub, in Cushing, Oklahoma, U.S., March 24, 2016.    REUTERS/Nick Oxford

China's factory activity extended declines in August due to new COVID infections, the worst heat wave in decades and an embattled property sector that weighed on production, suggesting the economy will struggle to sustain momentum.

Parts of China's southern city of Guangzhou imposed COVID curbs on Wednesday, joining the tech hub of Shenzhen in battling flare-ups.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.