New York November 17 2022: Oil fell more than 3% on Thursday as rising numbers of COVID-19 cases in China and the suggestion of higher rates than currently expected in the United States weighed on demand.
Brent crude fell $3.09 to $89.77 a barrel, a 3.33% loss, by 12:55 p.m. ET (17:55 GMT). U.S. West Texas Intermediate (WTI) crude slide $3.96, or 4.63%, to $81.63 per barrel.
“It’s kind of a triple whammy. We’ve got COVID-19 cases rising in China, interest rates are continuing to rise here in the U.S. and now we’ve got technical weakness in the market,” said Dennis Kissler, senior vice president of trading at BOK Financial.
St. Louis Federal Reserve President James Bullard said a basic monetary policy rule would require rates to rise to at least around 5%, while stricter assumptions would recommend rates above 7%.
The dollar also rose as investors digested U.S. economic data. A stronger dollar makes dollar-denominated oil more expensive for holders of other currencies.
China reported rising daily COVID-19 infections and Chinese refiners have asked to reduce Saudi crude volume in December, Reuters has reported, while also slowing Russian crude purchases.
While China’s COVID caseload is small compared with the rest of the world, the world’s largest crude importer maintains stringent policies to quash outbreaks before they spread, dampening fuel demand.
On technical indicators, U.S. front month futures fell below the 50-day simple moving average, triggering liquidation by funds, Kissler said, adding that he expects the pressure to likely continue into first part of next week.
Poland and NATO on Wednesday said a missile that crashed inside NATO member Poland was probably a stray fired by Ukraine’s air defences and not a Russian strike, easing fears of the war between Russia and Ukraine spilling across the border.
“Thankfully, those fears have abated and the situation de-escalated, which has seen oil gains unwound,” said Craig Erlam, senior market analyst at OANDA. “China remains a downside risk for oil in the near term.”
Oil gained some support from official figures that U.S. crude stocks fell by a bigger than expected 5 million barrels in the most recent week.
Supply is also tightening in November as OPEC and its allies, known collectively as OPEC+, implement their latest output controls to support the market.
