SINGAPORE, Nov 7 (Reuters) – Oil prices fell more than USD 1 a barrel on Monday after Chinese health officials on the weekend reiterated their commitment to a stringent COVID containment approach, dashing hopes of a rebound in oil demand from the world’s top crude importer.
Brent crude futures dropped USD 1.24 or 1.26% to trade at USD 97.33 a barrel at 0731 GMT, after falling as low as USD 96.50 earlier in the day. US West Texas Intermediate crude was at USD 91.17 a barrel, down USD 1.44 or 1.55% after hitting a session-low of USD 90.40.
“Oil prices dropped sharply as the Chinese officials vowed to stick to the COVID-zero policy while infected cases climbed in China, which may cause more restrictions measures, darkening the demand outlook,” CMC Markets analyst Tina Teng said.
A jump in the US dollar is also weighing on oil prices, she added.
Four Federal Reserve policymakers on Friday indicated they would still consider a smaller interest rate hike at their next policy meeting despite strong jobs data.
Brent and WTI rose last week, climbing 2.9% and 5.4% respectively on rumours of a possible end to stringent COVID-19 lockdowns despite the lack of any announced changes.
However, at a news conference on Saturday, health officials said they will persevere with their “dynamic-clearing” approach to COVID cases as soon as they emerge.
Meanwhile, China’s exports and imports unexpectedly contracted in October, the first simultaneous slump since May 2020, as a perfect storm of COVID curbs at home and global recession risks dented demand and further darkened the outlook for a struggling economy.
Although China’s crude oil imports rebounded to the highest level since May, volume for the first 10 months was still 2.7% below the same period a year earlier at 413.53 million tonnes or 9.93 million bpd.
“The market is still dealing with signs of weakness in oil demand from already high prices and the weak economic backdrop in developed markets,” ANZ analysts said in a note, adding that demand in Europe and the United States has fallen back to 2019 levels.
“We now expect global demand in Q4 2022 to grow by only 0.6 mb/d (millions of barrels per day) from the same quarter last year and to moderate next year.”
Oil prices have been underpinned by expectations of tighter supplies as the European Union’s embargo on Russia’s seaborne crude exports will start on Dec. 5 even though refineries worldwide are ramping up output.
US oil refiners this quarter will run their plants at breakneck rates, near or above 90% of capacity. China’s largest private refiner Zhejiang Petroleum and Chemical Co (ZPC) is raising diesel output.
Kuwait Integrated Petroleum Industries Co (KIPIC) said on Sunday the first phase of the Al-Zour refinery has started commercial operations, according to a state news agency.
(Reporting by Florence Tan and Mohi Narayan; Editing by Lincoln Feast, Kenneth Maxwell and Edwina Gibbs)