Oil prices were hit by worries of China reporting new covid-19 cases, as it might slow down oil demand in the world’s biggest oil importer. A surprise jump in U.S. crude oil inventories was also a factor for the slight decrease.
This Friday, crude oil prices fell around 1,3%. Brent lost 60 cents or 1,1% and closed at $55,50 per barrel; while the West Texas Intermediate lost 68 cents, 1,3%, and closed at $52,45 per barrel; a slight decrease compared with the 11 weeks high record hit just recently.
As said above, a surprise jump in U.S. crude oil inventories was also a factor for oil prices decrease. They jumped by 4,4 million barrels in the week ended in January 15. Industry expected a draw by 1,2 million barrels, the energy Information Administration informed this Friday.
According to experts, the resurgence in Covid-19 cases in China is making investors worry about demand; after the oil prices crash in April, China’s demand for crude oil and its imports were a huge part of oil prices recovery.
In fact, China’s demand underpinned most of market gains in 2020; nevertheless, with new lockdowns and social distancing restrictions, traveling, and overall consumption of the oil chain of value products may hit demand and prices again.
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New covid-19 cases in China spark worries about demand
According to the U.S. Transportation Department, travel on the U.S. roads fell 11% in November, a deeper decline compared to the prior month, as covid-19 cases kept surging all across the nation.
“The pandemic seems to continue to expand into a second wave in China, with infections rising by the day and reaching again different regions such as Shanghai,” said Louise Dickson, Rystad Energy oil markets analyst.
The silver lining was the pike in U.S. refineries utilization rates, which rose by 0,5% to a total capacity of 82,5%, or 110,000 barrels per day, according to data from EIA. This is seen with optimism, as a sign of demand rebouncing in the short term.
“The refinery runs came in better, so basically the market is getting a little support on the fact that we are seeing continued improvement in demand,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.