Oil drops as geopolitical tensions ease, China COVID concerns return

Oil drops as geopolitical tensions ease, China COVID concerns return

By Emily Chow

SINGAPORE (Reuters) – Oil prices fell for a second day at the start of Asian trading on Thursday as concerns over geopolitical tensions eased and the rising number of COVID-19 cases in China added to concerns demand from the world’s largest importer of crude.

Brent crude futures fell 62 cents, or 0.7%, to $92.24 a barrel at 0110 GMT. U.S. West Texas Intermediate (WTI) crude futures fell 65 cents, or 0.8%, to $84.94 a barrel.

Brent fell 1.1% and WTI 1.5% on Wednesday after Russian oil shipments restarted through the Druzhba pipeline to Hungary.

Crude oil tumbled after NATO cleared Russia’s missile attack on Poland, as demand concerns (return) to traders’ focus amid ongoing COVID restrictions in China and a gloomy global economic outlook,” said Tina Teng, analyst at CMC Markets.

Poland and the NATO military alliance said on Wednesday that a missile that crashed inside Poland was likely a stray missile fired by Ukrainian air defenses and not a Russian strike, allaying fears that the war between Russia and Ukraine does not spread across the border.

Oil prices fell despite a larger-than-expected drop in U.S. crude oil inventories, Teng added.

Crude inventories in the United States, the world’s largest oil consumer, fell 5.4 million barrels in the week ended Nov. 11 to 435.4 million barrels, Energy said on Wednesday. Information Administration, compared with expectations from a Reuters poll for a drop of 440,000 barrels. .

However, inventories of gasoline and distillate fuels both rose more than expected.

More oil is expected to flow to the United States as TC Energy lifted a force majeure on its 622,000 barrel-per-day Keystone pipeline that supplies the Midwest and Gulf Coast that had cut shipments by 7%.

Ongoing concerns about weak demand in China are “also keeping markets grounded,” said Stephen Innes, managing partner at SPI Asset Management, as it continues to report more COVID cases in major cities.

“With COVID cases in China continuing to rise, especially as we inch closer to flu season, traders have few options to recalibrate their positions, reflecting the possibility of more blockages in heavily populated centers that hurt oil demand exponentially more than in other areas of the economy,” Innes says.

China’s number of COVID cases is low compared to the rest of the world, but it maintains strict policies to quash cases before they spread further.

The National Health Commission reported 23,276 new COVID-19 infections on November 16, of which more than 20,000 were asymptomatic.

(Reporting by Emily Chow; Editing by Christian Schmollinger)

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