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Oil Prices Fall as Demand Fades and China Clings to its Stringent COVID Strategy

After Chinese health authorities reaffirmed their commitment to a severe COVID control program over the weekend, oil prices dropped by more than a dollar a barrel on Monday. This dashed expectations of a resurgence in oil demand from the country that imports the most petroleum of any country in the world.

After reaching a day’s low of $96.50 earlier in the trading session, the price of a barrel of Brent oil fell as much as $1.24, or 1.26%, to trade at $97.33 at 7:31 GMT. After reaching a session low of $90.40, the price of a barrel of West Texas Intermediate oil in the United States was trading at $91.17, which represented a decrease of $1.44, or 1.55%.

“Oil prices dropped sharply as Chinese officials vowed to stick to the COVID-zero policy while infected cases climbed in China,” said Tina Teng, an analyst for CMC Markets. “This may cause more restrictions measures, which will darken the demand outlook,” she added. “Oil prices fell sharply as Chinese officials vowed to stick to the COVID-zero policy.”

She also said that the rise in the value of the dollar is another factor that is dragging down oil prices.

Despite the positive employment statistics released on Friday, four members of the Federal Reserve’s policymaking committee indicated that they would still contemplate a moderate interest rate increase at the next meeting of the committee.

Brent and WTI both increased in price over the last week, with Brent increasing by 2.9% and WTI increasing by 5.4% respectively, despite the fact that no adjustments to COVID-19 lockdowns have been officially disclosed.

However, at a press conference held on Saturday, authorities from the health department said that they would continue to implement their “dynamic-clearing” strategy for COVID cases as soon as they become known.

As a perfect storm of COVID curbs at home and global recession risks dented demand and further darkened the outlook for an already struggling economy, China’s exports and imports unexpectedly contracted in October, marking the first simultaneous slump since May 2020. This was the first time that this had happened since May 2020. continue reading

Despite the fact that China’s crude oil imports rose to their highest level since May, the amount for the first 10 months was still 2.7% lower than it was during the same time a year earlier, coming in at 413.53 million tonnes, which is equivalent to 9.93 million bpd. continue reading

ANZ analysts stated in a note that “the market is still struggling with signals of weakening in oil demand from already high prices and the negative economic backdrop in developed nations.” They said that demand in Europe and the United States has gone back to levels that were seen in 2019.

“We now forecast global demand in Q4 2022 to increase by just 0.6 mb/d (millions of barrels per day) from the same quarter last year, and we anticipate that this growth will decline the following year.”

Even though refineries all over the globe are ramping up production, oil prices have been supported by the prospect of fewer supplies. On December 5, the European Union will begin imposing an embargo on Russia’s seaborne petroleum shipments. This has led to the assumption of tighter supplies.

In the next three months, oil refiners in the United States will operate their facilities at rapid speeds, reaching or exceeding 90 percent of capacity. Zhejiang Petroleum and Chemical Co (ZPC), the biggest privately owned refinery in China, is increasing its diesel production.

According to a report from a state-run news agency, Kuwait Integrated Petroleum Industries Company (KIPIC) announced on Sunday that the first phase of the Al-Zour refinery had commenced commercial operations.