LONDON – Oil prices fell in volatile trade on Tuesday on fears of higher U.S. supply amid economic slowdown and lower Chinese fuel demand.
Source: Reuters
Brent crude futures fell by $1.35, or 1.47%, to $90.27 a barrel by 1406 GMT.
U.S. West Texas Intermediate (WTI) crude futures were down $1.77, or 2.07%, at $83.69, having risen by over $1 earlier in the session.
China’s fuel demand outlook weighed on sentiment after the world’s top crude oil importer delayed release of economic indicators originally scheduled to be published on Tuesday. No date was given for a rescheduled release.
Also in focus was the Bank of England’s plan to start selling the vast government bond holdings it amassed during the coronavirus crisis. That sent long-dated yields higher, indicating increased risks to financial stability.
On the supply side, market chatter of U.S. oil reserve release announcement weighed on sentiment, UBS analyst Giovanni Staunovo said.
The Biden administration plans to sell oil from the Strategic Petroleum Reserve in an effort to cool fuel prices before next month’s congressional elections, sources told Reuters on Monday.
In addition, U.S. crude oil stocks were expected to have risen for a second consecutive week, a preliminary Reuters poll showed on Monday.
Output in the Permian Basin of Texas and New Mexico, the biggest U.S. shale oil basin, is forecast to rise by about 50,000 barrels per day (bpd) to a record 5.453 million bpd this month, the Energy Information Administration said.
Price support came in early trading from investors increasing long positions in futures after a 2 million barrel per day (bpd) cut to output targets agreed by OPEC+, ANZ Research analysts said in a note.
Several members of the oil producer group have endorsed the cut after the White House accused Saudi Arabia of coercing some nations into supporting the move, a charge Riyadh denies.
“Even though the production cut is not likely in reality to be even half as high, the U.S. government sees it as an affront … The question now is how the U.S. will react, as this could have a far-reaching impact on the oil market,” Commerzbank said in a note.
