Oil futures ease 1% as China widens Covid curbs

OIL prices eased about 1 per cent on Friday (Oct 28) after top crude importer China widened its Covid-19 curbs, though the crude benchmarks were poised for a weekly gain on supply concerns and surprisingly strong economic data.

Brent futures fell US$1.19, or 1.2 per cent, to settle at US$95.77 a barrel. US West Texas Intermediate (WTI) crude fell US$1.18, or 1.3 per cent, to $87.90.

US gasoline futures dropped about 3 per cent, while US diesel futures rose about 5 per cent to their highest since mid-June.

“Diesel (was) still (the) strongest component of complex (with) shorts being squeezed out of the November contract ahead of Monday expiry,” analysts at energy consulting firm Ritterbusch and Associates said.

For the week, Brent rose about 2 per cent and WTI was up about 3 per cent.

Chinese cities ramped up Covid-19 curbs on Thursday, sealing up buildings and locking down districts after China registered 1,506 new Covid infections on Oct 27, the National Health Commission said, up from 1,264 new cases a day earlier.

The International Monetary Fund expects China’s growth to slow to 3.2 per cent this year, a downgrade of 1.2 points from its April projection, after an 8.1 per cent rise in 2021.

“It’s hard to make a case for a rebound in China’s crude purchases given the backdrop of uncertainty over its zero-Covid policy,” said PVM Oil analyst Stephen Brennock.

PetroChina said China’s demand for refined fuel and natural gas was set to grow year on year in the fourth quarter in tandem with an expected economic recovery as Beijing rolls out more stimulus policy.

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Economic strength in two major economies limited oil’s losses.

Data on Thursday showed a strong rebound in US gross domestic product in the third quarter, demonstrating resilience in the world’s largest economy and oil consumer.

The German economy also grew unexpectedly in the third quarter, data showed on Friday, as Europe’s largest economy kept recession at bay despite high inflation and energy supply worries ahead of a looming European ban on Russian crude imports.

“The market remains wary of the impending deadlines for European purchases of Russian crude before the sanctions kick in on Dec 5,” ANZ Research analysts said in a note.

Global oil-and-gas giants including Exxon Mobil, Chevron and Equinor posted huge third-quarter profits, feeding criticism from consumer groups in the US and Europe. US President Joe Biden has told oil companies they are not doing enough to bring down energy costs.

US oil and natural gas rigs fell this week, but in October notched their first monthly increase since July, according to energy service firm Baker Hughes.

The Organization of the Petroleum Exporting Countries is likely to maintain its view world oil demand will rise for another decade. REUTERS