SINGAPORE, Nov 7 (Reuters) – Oil prices fell more than $1 a barrel on Monday after Chinese authorities over the weekend reiterated their commitment to a strict COVID containment approach, dashing hopes a rebound in demand for oil from the world’s largest importer of crude oil.
Brent crude futures fell $1.20, or 1.2%, to $97.37 a barrel at 0227 GMT, after hitting $96.50 earlier. U.S. West Texas Intermediate crude was at $91.24 a barrel, down $1.37, or 1.5%, falling to a session low of $90.40 a barrel earlier in the session.
“Oil prices fell sharply as Chinese officials pledged to stick to a zero COVID policy as infection cases surged in China, which could lead to more restrictive measures, darkening demand outlook,” said Tina Teng, an analyst at CMC Markets.
A jump in the US dollar is also weighing on oil prices, she added.
On Friday, four Federal Reserve policymakers said they would still consider a lower interest rate hike at their next policy meeting despite strong jobs data.
Brent and WTI rose last week, up 2.9% and 5.4%, respectively, as rumors of a possible end to the strict COVID-19 lockdowns sent Chinese stock markets higher and higher. commodity prices despite the absence of any announced changes.
However, at a press conference on Saturday, health officials said they would stick to their approach of “aggressively cleaning up” COVID cases as soon as they emerge.
Trade data from the world’s second-largest economy later Monday could show a further slowdown in exports as global demand continues to slow.
“The market continues to face signs of weak oil demand due to already high prices and a weak economic backdrop in developed markets,” ANZ analysts said in a note, adding that demand in Europe and the United States had returned to 2019 levels.
“We now expect global demand in the fourth quarter of 2022 to grow by only 0.6 mb/d (million barrels per day) compared to the same quarter last year and to moderate next year.”
Oil prices are supported by expectations of tighter supplies as the European Union embargo on Russian crude oil exports by sea will begin on December 5 as refineries around the world increase their production to meet the strong demand for diesel.
This quarter, U.S. oil refiners will operate plants at breakneck rates near or above 90% capacity, while China’s largest private refiner Zhejiang Petroleum and Chemical Co (ZPC) ramps up diesel production.
Kuwait Integrated Petroleum Industries Co (KIPIC) said on Sunday that the first phase of the Al-Zour refinery has started commercial operations, according to the state news agency (KUNA).
Reporting by Florence Tan; Editing by Lincoln Feast and Kenneth Maxwell
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