Oil falls as geopolitical tensions ease, China COVID concerns return

SINGAPORE  – Oil prices fell for a second day in early Asian trade on Thursday as concerns over geopolitical tensions eased and rising numbers of COVID-19 cases in China added to demand worries in the world’s largest crude importer.

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

Brent dropped by 1.1 percent and WTI declined by 1.5 percent on Wednesday after Russian oil shipments via the Druzhba pipeline to Hungary restarted.

“Crude oil fell after NATO cleared Russia’s missile attack on Poland, while demand concerns (are) back to trader’s focus amid ongoing China’s COVID curbs and gloomy global economic outlooks,” said Tina Teng, an analyst at CMC Markets.

Poland and military alliance NATO said on Wednesday that a missile which crashed inside Poland was probably a stray fired by Ukraine’s air defences and not a Russian strike, easing fears of the war between Russian and Ukraine spilling across the border.

Oil prices eased despite a larger-than-expected draw in crude oil stockpiles in the United States, added Teng.

Crude stocks in the U.S., the world’s biggest oil consumer, fell by 5.4 million barrels in the week ended Nov. 11 to 435.4 million barrels, the Energy Information Administration said on Wednesday, compared with expectations in a Reuters poll for a 440,000-barrel drop.

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

More oil is set to flow to the U.S. 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 reduced shipments by 7%.

Sustained concerns of demand weakness 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 move towards flu season, traders are left with little option to recalibrate positions reflecting the possibility of more lockdowns in heavily populated centers that hurt oil demand exponentially more than other areas of the economy,” said Innes.

China’s COVID caseload is small compared with the rest of the world, but it maintains stringent policies to quash out cases before they further spread.

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