LONDON: Oil fell sharply on Wednesday after falling in the previous session, with demand concerns stemming from the state of the global economy and rising COVID cases in China weighing on oil prices.
Brent futures were down $3.04, or 3.7%, at $79.06 a barrel by 1452 GMT. U.S. crude fell $2.91, or 3.8 percent, to $74.02.
Both benchmarks fell more than 4 percent on Tuesday, with Brent suffering its biggest one-day drop in more than three months.
“Concerns about the state of the global economy are front and center on traders’ minds and will remain so for the foreseeable future,” said PVM Oil analyst Stephen Brink.
The Chinese government also increased export quotas for the first batch of refined oil products to 2023, signaling expectations of weaker domestic demand.
Top oil exporter Saudi Arabia may cut prices for its flagship Arab Light crude grade for Asia in February, which is set at a 10-month low for the month, as the need Oversupply has clouded the market.
The head of the International Monetary Fund (IMF) has warned that most of the global economy will face a difficult year in 2023 as the main engines of global growth – the US, Europe and China – all face weaker activity. are
Monetary policy is also in focus, with the US Federal Reserve raising interest rates by 50 basis points (bps) after four consecutive hikes of 75 bps in December. If the Fed accelerates its rate hikes, it could slow the economy and curb fuel consumption.
OPEC oil output rose in December, JEE News found on Wednesday, despite an agreement by the broader OPEC+ alliance to cut production targets to support the market.
The Organization of the Petroleum Exporting Countries (OPEC) pumped 29 million barrels per day (bpd) last month, the survey showed, up 120,000 bpd from November.
Lending some support to oil, the dollar weakened on Wednesday after posting big gains in the previous session. A weak dollar usually boosts demand for oil because dollar-denominated commodities become cheaper for buyers in other currencies.
U.S. crude stockpiles are expected to rise by 2.2 million barrels, with distillate inventories expected to decline, a preliminary JEE News showed on Monday.
Industry group the American Petroleum Institute is scheduled to release U.S. crude inventories data at 4:30 p.m. EDT (2030 GMT) on Wednesday. The Energy Information Administration will release its data at 10:30 a.m. (1430 GMT) on Thursday.
Bank UBS expects Brent prices to rise to $110 a barrel and WTI to $107 in 2023.
