Oil dips as investors eye U.S. crude release, China demand concerns

Oil futures fell for a second session on Friday on expectations that Washington may soon calm prices that are still above $ 80 a barrel, while restrictions on movement in China to curb the outbreak of the emerging Corona virus (Covid-19) affected demand for fuel. .

Brent crude futures were down six cents at $84.41 a barrel at 0427 GMT. US West Texas Intermediate crude fell 21 cents, or 0.3 percent, to $81.91 a barrel.

China, the world’s second largest oil consumer, has suspended some international flights and stepped up efforts to control the virus outbreak in Tianjin, while a transmissible Omicron variant has spread to the northeastern city of Dalian.

Several cities, including Beijing, have also urged people to stay put during the Lunar New Year holiday, which could reduce demand for transportation fuels during the peak travel season.

The world’s largest oil importer in 2021 also recorded its first annual decline in crude oil shipments in two decades as Beijing tightens its refining sector and cuts huge stocks, although traders expect imports to recover this year.

“The market is a bit worrisome,” Avtar Sandhu, director of commodities at Phillip Futures in Singapore, said, adding that reports about the COVID-19 situation in China and the sale of strategic petroleum reserves in the United States were a concern.

The US Energy Department said Thursday it has sold 18 million barrels of strategic crude oil reserves to six companies, including ExxonMobil and refining unit Valero Energy Corp.

However, Brent and West Texas Intermediate prices are set to rise for the fourth consecutive week, buoyed by supplies, geopolitical concerns in Libya and Kazakhstan and a drop in US crude stocks to their lowest levels in 2018.

Some investors are also optimistic that Omicron’s impact on the global economy and oil demand will be short-lived.

Several banks have forecast oil prices to reach $100 a barrel later this year as demand is expected to outpace supply.

“The short-term outlook still carries many risks, but optimism is high that they will be short-term,” OANDA analyst Edward Moya said in a note.

However, with oil prices above $80, there is increasing political pressure on the White House to pressure OPEC+ to hit its production quotas, he said.

“Biden may resort to another SPR issuance, and while that won’t solve any problems, it could bring WTI down to the $80 level,” Moya said.

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