U.S. Oil Stocks Crash But Prices Barely Change Amid China Worries By Investing.com

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By Barani Krishnan

Investing.com — Oil prices were little changed on Wednesday as positive U.S. inventory data was overshadowed by COVID-related deaths in China, raising questions about near-term demand from the world’s second-largest oil importer. oil.

A huge drop of 8 million barrels of U.S. crude reported by the Energy Information Administration, or EIA, for the past week — double the build analysts expected — was dumped by traders, despite data helping a barrel to rise about $1 in price minutes after the report surfaced.

The EIA also reported explosive figures for the consumption of distillates, which are largely refined into diesel, and a decent draw for gasoline compared to forecasts.

Crude prices initially fell about 2% after the EIA data and rebounded slightly on Wednesday afternoon. Prices fell around 5% on Tuesday, ending a four-day rally after the International Monetary Fund cut its global growth forecast for 2022/23 due to inflation and other economic challenges triggered by Russia’s invasion of Ukraine.

Shanghai’s COVID-related deaths, believed to number three on Monday and another seven on Tuesday, have heightened fears that the pandemic could return in a bigger way to China’s second-largest city which has been in lockdown for weeks now.

“The downgrades to IMF and World Bank growth forecasts in recent days (and) the war in Ukraine and lockdowns in China … will weigh on demand this year,” said platform analyst Craig Erlam. OANDA e-commerce website.

, the London-traded global benchmark for crude, settled 45 cents, or 0.4%, at $106.80 a barrel. The session low was $104.67.

Traded in New York, or WTI, the benchmark for U.S. crude, settled 19 cents, or 0.2%, at $102.75, after breaking below $100 support earlier with a low of $99.89 session.

In Shanghai, officials have begged residents to cooperate, after some people, weary of weeks of lockdown rules, refused to comply with virus testing procedures amid a rare outburst of public anger over controls city ​​pandemics.

Chinese authorities said the seven people who died on Tuesday were between the ages of 60 and 101 and unvaccinated. They also had pre-existing health conditions.

A slew of Chinese economic data this week confirmed that the world’s second-largest economy has collapsed as the government’s zero Covid policy comes up against the biggest virus outbreak in two years in the second-largest economy.

Among these were retail sales, which fell 3.5% on the year to March, the worst annual decline since 2020; unemployment, which rose to 5.8%, above the government’s target of 5.5% and the worst since May 2020; and a general slowdown in industrial production.

Besides China, oil and commodity markets have also been rocked in the past two days by fears that aggressive rate hikes planned by the Federal Reserve to combat the worst US inflation in 40 years could lead to a recession of the #1 economy.

The positive inventory data cited by the EIA gave only a brief respite from the downward price trend of the past two days.

The EIA reported a decline of 8.02 million barrels for the week ended April 15. Analysts tracked by Investing.com had instead predicted a rise of 2.47 million, to add to the previous week’s build of 9.34 million.

Compounding this drop in crude is the release of an additional 8.1 million barrels from the U.S. Strategic Petroleum Reserve, or SPR, by the Biden administration as it attempts to fill the supply gap in global oil markets caused by Western sanctions against Russia. With the release, SPR stocks were at their lowest since February 2002, the EIA said.

fell 761,000 barrels from analysts’ expectations for a drawdown of 976,000. Gasoline fell 3.65 million barrels the previous week.

fell 2.66 million barrels, adding to the previous week’s draw of 2.9 million barrels. Analysts had forecast a drop of just 829,000 barrels for the past week.

Steve R. Hansen