MOSCOW (MRC) - Oil prices fell on Thursday on fears about the economic outlook in the world’s biggest oil importer following ratings downgrades to two Chinese property developers, and after some governments took measures to fight the Omicron varaint of the coronavirus, reported Reuters.
Brent crude futures fell USD1.01, or 1.3%, to USD74.81 a barrel by 12:05 p.m. EDT (1705 GMT), backing off a session high of USD76.70. US West Texas Intermediate (WTI) crude futures were down USD1.00, or 1.4%, at USD71.36 after hitting a peak of USD73.34.
On Thursday, ratings agency Fitch downgraded property developers China Evergrande Group and Kaisa Group to “restricted default” status, saying they had defaulted on offshore bonds, while a source said that Kaisa had started work on restructuring its USD12 billion offshore debt.
“The ... news ... exacerbates the Chinese GDP growth fears and ultimately could impact the oil-buying appetite of the world’s biggest crude customer,” said Rystad Energy analyst Louise Dickson.
On Wednesday, British Prime Minister Boris Johnson imposed tougher COVID-19 restrictions in England, saying people should work from home where possible, wear masks in public places and show COVID-19 vaccine passes for entry to certain events and venues.
“Although laboratory tests showed that the Pfizer vaccine has a neutralising effect on Omicron ... new measures are being introduced to try to stop the spread of the virus,” said Tamas Varga of oil brokerage PVM.
Denmark also plans new restrictions, including closure of restaurants, bars and schools, while China has halted group tourist trips from Guangdong. South Korea has registered record infections while cases remain elevated in Singapore and Australia.
The number of Americans filing new claims for unemployment benefits dropped to the lowest level in more than 52 years last week as labor market conditions continued to tighten amid an acute shortage of workers, according to new data published by the US Labor Department.
“The oil market doesn’t always respond well to good economic news either, because it could prompt the Federal Reserve to tighten monetary policy,” said John Kilduff, partner at Again Capital LLC in New York.
The Omicron outbreak sparked a 16% slump in Brent prices from Nov. 25 to Dec. 1. More than half of the drop has been recouped this week, but analysts say a further recovery could be limited until Omicron’s impact is clearer.
US inventory data released on Wednesday also weighed on prices.
Energy Information Administration (EIA) data showed that crude inventories were down by 240,000 barrels last week, much less than analysts in a Reuters poll had expected, with stocks at the Cushing delivery hub in Oklahoma rising by 2.4 million barrels. Fuel stocks also rose by a combined 6.6 million barrels, the data showed.
As MRC informed before, US commercial crude stocks fell 3.48 million barrels to 413.96 million barrels in the week ended Sept. 17, to more than 8% below the five-year average, Energy Information Administration data showed. Stocks were last lower Oct. 5, 2018.
We remind that in late August, 2021, US crude stocks dropped sharply while petroleum products supplied by refiners hit an all-time record despite the rise in coronavirus cases nationwide, the Energy Information Administration said. Crude inventories fell by 7.2 million barrels in the week to Aug. 27 to 425.4 million barrels, compared with analysts' expectations in a Reuters poll for a 3.1 million-barrel drop. Product supplied by refineries, a measure of demand, rose to 22.8 million barrels per day in the most recent week. That's a one-week record, and signals strength in consumption for diesel, gasoline and other fuels by consumers and exporters.
We also remind that US crude oil production is expected to fall by 160,000 barrels per day (bpd) in 2021 to 11.12 million bpd, EIA said in a monthly report earlier this year, a smaller decline than its previous forecast for a drop of 210,000 bpd.