Crude oil price down to $79/brrl amid global economy concerns
Crude oil fell sharply after slumping in the previous session, weighed down by demand concerns stemming from the state of the global economy and rising COVID cases in China.
Brent futures fell $3.04 to $79.06 a barrel for a 3.7 per cent loss, while US crude dropped $2.91, or 3.8 per cent, to $74.02.
Both benchmarks plunged more than 4 per cent on Tuesday, with Brent suffering its biggest one-day decline in more than three months.
“Worries about the state of the global economy are front and centre of traders’ minds and will remain so for the foreseeable future,” said PVM Oil analyst Stephen Brennock.
The Chinese government also increased export quotas for refined oil products in the first batch for 2023, signalling expectations of poor domestic demand.
Top oil exporter Saudi Arabia could cut prices for its flagship Arab Light crude grade to Asia in February, having been set at a 10-month low for this month, as concern about oversupply continued to cloud the market.
The head of the International Monetary Fund warned that much of the global economy would face a tough year in 2023 because the main engines of global growth – the United States, Europe and China – were all experiencing weakening activity.
Monetary policy is also in focus, with the US Federal Reserve having raised interest rates by 50 basis points (bps) in December after four consecutive increases of 75 bps each. If the Fed intensifies its rate hikes, that could slow the economy and hamper fuel consumption.
OPEC oil output rose in December, a media survey found on Wednesday, despite an agreement by the wider OPEC+ alliance to cut production targets to support the market.
The Organisation of the Petroleum Exporting Countries (OPEC) pumped 29 million barrels per day (bpd) last month, the survey found, up 120,000 bpd from November.
Lending oil some support, the dollar weakened on Wednesday after posting big gains in the previous session.
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A weaker dollar typically boosts demand for oil because dollar-denominated commodities become cheaper for buyers holding other currencies.
US crude oil stockpiles are likely to have risen by 2.2 million barrels, with distillate inventories expected to have fallen.
Industry group American Petroleum Institute is due to release data on US crude inventories on Wednesday.
