Oil prices struggled to find a footing on Thursday after easing in the previous session on a weakening global demand outlook.
Brent crude futures were down 7 cents, or 0.1%, to $92.38 a barrel as of 0650 GMT. West Texas Intermediate (WTI) crude was down 21 cents, or 0.2%, at $87.06 a barrel.
While both OPEC and the US Department of Energy lowered their demand outlook, the flare-up in COVID-19 cases in China has sparked new concerns over fuel consumption in the world’s top crude-importing country.
Growth risks have resurfaced for oil prices this week as initial excitement over OPEC+ output cuts were short-lived and gains appear to be waning.
While the OPEC+ production cuts may provide some base for oil prices, they are restrained as economic conditions and the Fed’s tightening process pose more risks.
Prices soared last week when the producer group, made up of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, agreed to cut supplies by 2 million barrels per day (bpd).
But OPEC on Wednesday lowered its demand growth outlook to between 460,000 bpd and 2.64m bpd this year, citing China’s resurgence of COVID-19 containment measures and high inflation.
It is evident that fears of increasing demand and intensifying supply problems will keep commodity prices volatile.
There could not be relief from China either, as authorities stepped up lockdown measures amid rising cases in Shanghai.
The US Department of Energy lowered both production and demand expectations in the US and globally. It now sees a mere 0.9% increase in US consumption in 2023, down from the previous 1.7% increase forecast. The ministry sees worldwide consumption rising by just 1.5% from the previous 2% growth forecast.
Worsening demand for crude oil is contributing to oil stock gains. U.S. crude inventories increased by about 7.1 million barrels in the week ended Oct. 7, according to market sources based on API data.
The energy market is under pressure from the widely rising US dollar, including low-yielding currencies like the yen.
The Federal Reserve’s commitment to continue raising interest rates to curb high inflation has increased yields, making the U.S. currency more attractive to foreign investors.
