Oil falls on concerns of faltering economic growth to hit demand
Oil prices edged down on Wednesday on concerns that oil demand growth will fall as major economies suffer through inflation and supply chain issues though surging prices for power generation fuels such as coal and natural gas limited losses.
Brent crude futures fell 11 cents, or 0.1%, to $83.31 a barrel at 0502 GMT, extending a 23 cent loss on Tuesday.
U.S. West Texas Intermediate (WTI) crude futures fell 11 cents to $80.53 a barrel after gaining 12 cents on Tuesday.
Both contracts pared losses after falling as much as 70 cents earlier when China, the world’s biggest crude importer, released data showing September imports fell 15% from a year earlier. read more
“The data is backward looking, but China’s energy shortages are very real in real-time,” Jeffrey Halley, a senior analyst at brokerage OANDA said.
“It will take a material fall in natural gas and coal prices to cap oil prices.”
China’s thermal coal prices surged to record highs on Wednesday as recent floods in key coal producing province Shanxi worsened a supply crunch, just as new efforts by Beijing to liberalise power prices boosted demand from power generators. read more
A strong U.S. dollar, trading near a one-year high, also weighed on oil prices, as it makes oil more expensive for those holding other currencies. read more
However, oil watchers are still focused on whether the soaring gas and coal prices will lead to more demand for oil products for power generation.
“There are growing expectations that the high prices for gas and thermal coal are likely to boost demand for alternative fuels such as diesel and fuel oil,” ANZ Research analysts said in a note.
Analysts polled by Reuters estimate U.S. crude inventories rose by 100,000 barrels in the week to Oct. 8, which would mark a third straight week of increases.
They also estimated that gasoline stockpiles rose about 100,000 barrels, while distillate inventories, which include diesel, heating oil and jet fuel, dropped by about 1 million barrels.
Data from the American Petroleum Institute, an industry group, is due at 4:30 p.m. EDT (2030 GMT) on Wednesday and from the U.S. Energy Information Administration on Thursday.