Oil prices inched down in volatile trade on Tuesday. As investor concerns about lower demand in China, the world’s biggest crude importer, and further increases in U.S. and European interest rates offset worries about tight fuel supplies ahead of winter.
Brent crude dropped 34 cents, or 0.4 percent to $93.66 a barrel by 0445 GMT, while WTI crude lowered by 20 cents, or 0.2 percent to $87.58 a barrel. Both contracts were lower by more than $1 earlier in the session, snapping a three-day rally.
Covid-19 curbs in China renewed concerns about lower global fuel demand, china the world’s second-largest oil consumer.
“The extensive Covid lockdowns and mass testing in China weigh on oil markets due to demand concerns,” an analyst at CMC Markets Tina Teng stated.
“Plus, the odds for the Fed to keep aggressive rate hikes will be strengthened if U.S. CPI comes out hotter than expected.”
The U.S. consumer price index data will probably release at 1230 GMT on Tuesday and while expectations are that the core inflation rate may show a peak, the European Central Bank and the Fed are prepared to increase interest rates further to address inflation.
Moreover, that could lift the value of the U.S. dollar toward other global currencies and make dollar-denominated oil more expensive for investors.
In the United States, the Strategic Petroleum Reserve (SPR) fell 8.4 million barrels to 434.1 million barrels in the week ended Sept. 9, the lowest since October 1984, according to statement released on Monday by the Department of Energy.
U.S. President Joe Biden in March plans to release 1 million barrels per day over six months from the SPR to deal with high U.S. fuel prices, which have contributed to inflation.
U.S. commercial oil stockpiles are expected to have fallen for five weeks in a row, falling by around 200,000 barrels in the week to Sept. 9, according to Reuters on Monday.
The American Petroleum Institute, an industry group, will release its inventory report at 4:30 p.m. EDT (2030 GMT) on Tuesday.
