Fears over China’s demand and a stronger dollar cause oil prices to decline to near 2-month lows

After initially falling by about $1 per barrel, oil prices fell to trade near two-month lows on Monday as supply fears subsided but worries about fuel demand from China and the strength of the US currency kept prices down.
By 0715 GMT, January Brent crude futures had decreased by 74 cents, or 0.8%, to $86.88 per barrel.
Prior to the contract’s expiration later on Monday, December West Texas Intermediate (WTI) crude futures for the United States were trading at $79.40 per barrel, down 68 cents or 0.9%.
Last week, the more active January contract decreased by 59 cents, or 0.7%, to reach $79.52 per barrel.
Brent and WTI, the two benchmarks, both finished Friday at their lowest levels since September 27, continuing their recent downward trend.
A rise in the U.S. currency today is also a bearish reason for oil prices, according to Tina Teng, an analyst with CMC Markets. “Aside from the reduced demand picture owing to China’s COVID limitations,” she added.
She said that the recent hawkish remarks from the U.S. Federal Reserve also raised concerns about the outlook for the U.S. economy. “Risk sentiment becomes fragile as all recent major countries’ economic statistics point to a recessionary scenario, especially in the U.K. and euro zone,” she said.
As the nation battles outbreaks across the country and in major cities, the number of new COVID cases in China has stayed close to April levels.
Beijing’s government instructed citizens to stay at home on Monday, prompting schools in some districts to switch to online instruction, and Guangzhou, a city in the south, imposed a five-day lockdown on its most populous district.
Markets for diesel remained competitive, with Europe and the US vying for barrels.
Even though China’s diesel exports nearly doubled from a year earlier in October to 1.06 million tonnes, the amount was still much lower than September’s 1.73 million tonnes.
Demand in China, the world’s largest petroleum importer, is still constrained by COVID regulations, and the currency has strengthened due to anticipation of future interest rate increases elsewhere, increasing the cost of commodities denominated in dollars for investors.
Source: Reuters

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