Oil edges lower on China demand pressures; market awaits U.S. inflation data

MELBOURNE, Nov 10 (Reuters) – Oil extended losses on Thursday for a fourth straight session as renewed Covid curbs weighed on markets in China, the world’s biggest crude importer, and traders awaited U.S. inflation data for signs of interest rate hikes.

Brent crude futures were down 41 cents, or 0.4%, at $92.24 a barrel by 0733 GMT. U.S. West Texas Intermediate (WTI) crude futures were down 48 cents, or 0.6%, at $85.35 a barrel.

Brent prices are down more than 6% so far this week, while WTI is down more than 7%.

The manufacturing hub of Guangzhou, a city of 19 million people, reported more than 2,000 new cases on Thursday, November 9, the third day above that level in the city’s worst outbreak ever. Millions of residents were asked to be tested for COVID-19 on Wednesday, and a city district was placed on lockdown, as local cases across China reached their highest level since April 30.

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On Thursday, the United States will release Consumer Price Index (CPI) data which is expected to show a slowdown in the inflation rate for both monthly and annual headline numbers. That could lead the US Federal Reserve to reduce the size of its planned interest rate hike, which would be seen as positive for the economy and oil demand growth.

Prices were also under pressure after a big rise in US crude inventories on Wednesday.

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“The outlook for oil prices has become more cautious,” said analysts at Haitong Futures in Shanghai.

“The US CPI data… will further impact market expectations from a macro level, further adding to the market’s wait-and-see sentiment.”

U.S. crude oil inventories rose by 3.9 million barrels last week, the Energy Information Administration said, pushing inventories to their highest level since July 2021. [EIA/S]

However, gasoline inventories fell by 900,000 barrels to the lowest level since November 2014 and distillate stockpiles fell by 500,000 barrels.

Commonwealth Bank analyst Vivek Dhar said the slowdown could be exacerbated by rising US crude oil inventories.

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He noted that stocks of distillates, which include diesel, heating oil and jet fuel, have fallen to their lowest levels in a decade and the number of days that inventories can meet demand is 26, nearly five days below the five-year average. “Much tighter conditions than the US oil or gasoline markets.”

Dhar forecast in a note to clients that Brent will average $95 a barrel in the fourth quarter as supply tightens with the December 5 implementation of a ban on Russian offshore oil imports by the European Union.

Reporting by Sonali Paul in Melbourne and Muyu Xu in Singapore; Editing by Christian Schmollinger and Tom Hogg

Our Standards: The Thomson Reuters Trust Principles.

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