Oil fell for the second day on Thursday, owing to an uncertain demand outlook and the spread of COVID-19 infections in China, the world’s largest oil importer.
The Chinese government is lifting pandemic restrictions that have been in place for more than two years, but more countries are considering restrictions on Chinese visitors as COVID-19 infections spread.
This lowered the price of Brent crude by $1.00 or 1.2% to $82.26 per barrel yesterday, while US West Texas Intermediate crude fell by $1.13 or 0.7% to $78.40 per barrel.
Nations ranging from the United States to Japan are concerned that new variants may emerge from China’s ongoing outbreak and that the world’s largest oil importer may fail to notify the rest of the world quickly enough.
India, Italy, and Taiwan have already imposed bans that will take effect next year, but the United Kingdom, Australia, the Philippines, and Malaysia are keeping an eye on the situation.
There have been no reports of new variants, but there is widespread concern about China’s lack of information and data.
The Energy Information Administration (EIA) reported on Thursday that US crude oil inventories increased unexpectedly last week as imports increased and exports decreased.
Crude oil prices fell today after the EIA reported an inventory build of 700,000 barrels for the week ending December 23rd, compared to a draw of 5.9 million barrels the previous week, which had temporarily pushed prices higher.
At 419 million barrels, US inventories are roughly 6% lower than the average for this time of year.
The American Petroleum Institute (API) reported an estimated inventory draw of 1.3 million barrels the day before, the second weekly drop in a row.
Analysts noted that, despite the unexpected increase in crude oil stocks, the report was positive, showing a solid rebound in implied oil demand, resulting in large draws of refined products.
However, support came as the US dollar fell, as investors worried about interest rate hikes. A weaker dollar lowers the price of oil for holders of other currencies.
Meanwhile, TC Energy Corp announced that the 622,000-barrel-per-day Keystone pipeline, which runs through rural Kansas, is operational.
The line shutdown impacted US supplies and briefly lifted oil prices, though neither benchmark changed after settlement.
