Image: Reuters Berita 24 English - On Wednesday, oil prices went down because COVID-19 restrictions in China, which is the top crude impor...
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| Image: Reuters |
Berita 24 English - On Wednesday, oil prices went down because COVID-19 restrictions in China, which is the top crude importer, and expectations of more interest rate hikes made people worry about a global economic recession and a drop in fuel demand.
At 01:13 GMT, Brent crude futures were down $1.12, or 1.2%, to $91.71 a barrel, after falling 3% in the previous session. The price of a barrel of U.S. West Texas Intermediate crude fell by $1.25, or 1.4%, to $85.63.
Oil lost some of the big gains it made on Monday after the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, decided to cut production by 100,000 barrels per day in October.
In a note, Edward Moya, a senior market analyst at OANDA, said, "Fading the OPEC+ production cut bounce wasn't that hard to do given a laundry list of global economic problems."
"Even though U.S. service data were better than expected, global growth doesn't look good at all, which is bad for crude prices."
China's strict zero-COVID policy has locked down cities like Chengdu, which has 21,2 million people, limiting people's movement and oil demand in the second-largest consumer in the world.
Analysts at ANZ Research said in a note that more infectious strains of the virus make them worry that authorities will have to lock down areas more often if China sticks to its zero-COVID policy.
Investors are also waiting to see if there will be more increases in interest rates to stop inflation. When it meets on Thursday, most people think that the European Central Bank will raise rates sharply. On Sept. 21, the U.S. Federal Reserve will meet after the ECB meeting.
Oil prices were also pushed down by a stronger U.S. dollar, which was up about 0.5% because of better news about the U.S. services industry. Oil is priced in U.S. dollars, so when the dollar gets stronger, people who use other currencies have to pay more for the commodity.
Prices were helped, though, by the idea that the United States would have less oil on hand.
A preliminary Reuters poll on Tuesday showed that U.S. crude stockpiles likely fell for the fourth week in a row, by about 733,000 barrels in the week ending September 2.
The amount of crude oil in the U.S. Strategic Petroleum Reserve (SPR) dropped by 7.5 million barrels in the week ending September 2. This is the lowest amount of crude oil in the SPR since November 1984.
The American Petroleum Institute and the Energy Information Administration will release their weekly reports on U.S. inventories a day later than usual, on Wednesday and Thursday instead of Monday. This is because Monday was a holiday.
