NEW YORK: Oil prices fell on Wednesday, pressured by low economic activity in leading crude importer China and a surprise build in US crude inventories as oil producers ramped up output after following frigid weather earlier this month.
Prices were also pressured after US Energy Information Administration data showed weekly crude inventories rose by 1.2 million barrels last week, compared with analysts’ expectations for a 217,000 barrel draw.
Brent crude futures for March, which expire today, fell 78 cents, or about 0.9%, to $82.09 a barrel by 11:01 a.m. EST (1601 GMT). The more actively traded April contract was down $1.00, or about 1.2%, at $81.50.
US West Texas Intermediate crude futures lost $99, or roughly 1.3%, to $76.83. Both benchmarks fell by more than $1 a barrel earlier in the session.
US refiners emerged from output cuts driven by cold weather, US crude runs fell to their lowest level since January 2023, as refinery utilization rates dipped by 2.6 percentage points in the week to 82.9%, according to the EIA. “Refiners are going to be in no hurry to rush back to levels above 90%,” said Bob Yawger, director of energy futures at Mizuho.
Manufacturing activity in China, the world’s second-largest economy, contracted a fourth straight month in January, an official factory survey showed on Wednesday.
The latest sign of the country’s broader economy struggling to regain momentum came days after a court ordered the liquidation of troubled property developer China Evergrande . The real estate sector accounts for a quarter of China’s GDP.
Major forecasters, including the Organization of the Petroleum Exporting Countries (OPEC), see oil demand growth in 2024 driven primarily by Chinese consumption.
“The factory data confirms our view that China, at least for now, is an impediment to global oil demand growth,” said Tamas Varga of oil broker PVM.
In other demand-dampening news, US policymakers are expected to keep interest rates unchanged this week. Economist predictions suggest that a cut is unlikely before June, given continuing strength in household spending and uncertainty over the economic outlook.
The Israel-Hamas war, meanwhile, has expanded to a naval conflict in the Red Sea between the United States and Iran-aligned Houthi militants.
While that has disrupted oil and natural gas tanker shipping, which is driving up delivery costs and starting to affect oil supplies, a Reuters poll suggested that record production in the West and slow economic growth will keep a lid on prices and limit any geopolitical risk premium.