Oil prices increase as concerns about China’s demand outweigh the significant drop in U.S. crude stock.

Wednesday saw a slight increase in oil prices as information indicating a larger-than-anticipated drop in U.S. crude last week overshadowed worries about a decline in Chinese demand for fuel due to tightening COVID-19 regulations.

While U.S. West Texas Intermediate (WTI) crude futures gained 25 cents, or 0.3%, to $81.20 a barrel, Brent crude futures increased by 27 cents, or 0.3%, to $88.63 a barrel at 0719 GMT.

As the United Arab Emirates, Kuwait, Iraq, and Algeria reaffirmed remarks made by Saudi Arabia’s energy minister that the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, were not considering raising oil output, both benchmark contracts increased by about 1% on Tuesday.
On Dec. 4, OPEC+ will meet to discuss output.

Market sources reported that for the week ending Nov. 18, American Petroleum Institute data showed a decrease in U.S. oil stockpiles of roughly 4.8 million barrels.

On average, analysts surveyed by Reuters had predicted a reduction in crude inventories of 1.1 million barrels.

Analysts had predicted a decline of 600,000 barrels in distillate stocks, which include heating oil and jet fuel, but instead they saw an increase of roughly 1.1 million barrels.

The market also received some support from a lack of clarity over how Russia will react to plans by the Group of Seven (G7) nations to cap Russian oil prices.

A senior U.S. Treasury official indicated on Tuesday that the price cap will soon be revealed and that it would likely be changed several times a year.

Meanwhile, top crude oil importer China has been grappling with a surge in COVID cases that has deepened worries about its economy and may continue to cap gains of oil prices, CMC Markets analyst Tina Teng said.

Late on Tuesday, financial hub Shanghai tightened rules for people entering the city while Beijing shut parks and museums.

Teng said that traders are also being cautious ahead of the release of the U.S. Federal Reserve’s minutes from its November policy meeting due at 1900 GMT.

“The Fed is expected to signal a slowdown in rate hikes but any surprising hawkish reiteration will weigh on sentiment, lifting the U.S. dollar and pressuring commodity prices,” Teng said.

Source: Reuters

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