Oil prices dip on U.S. inventory build, China COVID worries

SINGAPORE – Oil prices edged lower as industry data showed U.S. crude stockpiles rose more than expected and on worries a rebound in COVID-19 cases in top importer China would hurt fuel demand.

Brent crude futures fell 9 cents, or 0.1 percent, to $95.27 a barrel by 0727 GMT, while U.S. West Texas Intermediate (WTI) crude futures fell 20 cents, or 0.2 percent, to $88.71 a barrel. The benchmarks fell around 3 percent on Tuesday.

U.S. crude oil inventories rose by about 5.6 million barrels for the week ended Nov. 4, according to market sources citing American Petroleum Institute figures, while seven analysts polled by Reuters estimated on average that crude inventories would rise by about 1.4 million barrels.

Last week, the market had latched on to hopes that China might be moving toward relaxing COVID-19 restrictions but over the weekend health officials said they would stick to their “dynamic-clearing” approach to new infections.

COVID-19 cases in Guangzhou and other Chinese cities have surged, with millions of residents of the global manufacturing hub being required to have COVID-19 tests on Wednesday.

“With that (China reopening) narrative getting pushed back, coupled with a considerable build on U.S. inventory data, implying dimming U.S. demand, the recessionary crews are back out in full force this morning in Asia,” Stephen Innes, managing partner at SPI Asset Management, said in a note.

CMC Markets analyst Tina Teng said despite tight supply in the physical markets, China’s slowdown in demand has a major impact on the oil futures markets.

In another bearish sign, API data showed gasoline inventories rose by about 2.6 million barrels, against analysts’ forecasts for a 1.1 million drawdown.

The market will be looking out for official U.S. inventory data from the Energy Information Administration due at 10:30 a.m. EST (1530 GMT) for a further view on demand in the world’s biggest economy.

Meanwhile, supply concerns remain.

“In addition to ongoing OPEC+ supply cuts, Russian oil supply should fall as the EU ban on Russian crude and refined products comes into effect,” ING commodities strategists said in a note.

The EU will ban Russian crude imports by Dec. 5 and Russian oil products by Feb. 5, in retaliation to Russia’s invasion of Ukraine. Russia calls its actions in Ukraine a “special operation”.