Oil prices retreat on bets that growth in crude supply will exceed demand

An employee looks at the illuminated oil cracking complex at the Lukoil-Nizhegorodnefteorgsintez oil refinery in Russia.

Bloomberg | Donor

Oil prices fell for a third day on Wednesday amid rising expectations that growth in supply will outpace growth in demand next year, even though the omicron coronavirus variant does not appear to hold back mobility as severely. than previous variants of Covid-19.

US West Texas Intermediate (WTI) crude futures fell 52 cents, or 0.7%, to $ 70.21 a barrel at 2:15 a.m. GMT, after losing 56 cents in the previous session.

Brent crude futures fell 43 cents, or 0.6%, to $ 73.27 a barrel, after losing 69 cents on Tuesday.

The International Energy Agency (IEA) said on Tuesday that an increase in Covid-19 cases with the emergence of the Omicron variant would reduce global demand for oil at the same time as crude production is expected to increase, with especially in the United States, with supply exceeding demand at least until the end of next year.

In contrast, the Organization of Petroleum Exporters (OPEC) on Monday raised its forecast for world oil demand for the first quarter of 2022.

“The IEA’s bearish view of the market contrasted sharply with OPEC’s more positive view when it released its monthly outlook earlier this week. The division suggests volatility is likely to remain elevated in the near term,” said ANZ commodities analysts said in a note.

The strengthening US dollar is also weighing on the market, making commodities denominated in greenbacks more expensive for other countries. Markets are awaiting the results of a key US Federal Reserve policy meeting on Wednesday to see when the central bank may raise interest rates.

In another bearish indicator, industry data showed US crude inventories last week did not decline as much as expected.

Data from the American Petroleum Institute showed that U.S. crude inventories fell 815,000 barrels during the week ended Dec. 10, according to market sources, from a decline of 2.1 million barrels expected by 10 analysts polled by Reuters.

However, distillate inventories fell by 1 million barrels, compared to analysts’ forecasts of an increase of 700,000 barrels, and gasoline inventories increased by 426,000 barrels, which was a smaller increase than foreseen.

Weekly data from the US Energy Information Administration is due later Wednesday.

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Felix J. Dixon