Oil prices edged down on Wednesday on concerns that oil demand growth will fall as major economies suffer through inflation and supply chain issues through surging prices for power generation fuel such as coal and natural gas limited losses.
Brent crude futures fell 5 cents, or 0.1%, to $83.37 a barrel at 0622 GMT, extending a 23-cent loss on Tuesday.
US West Texas Intermediate (WTI) crude futures fell 6 cents to $80.58 a barrel after gaining 12 cents on Tuesday.
Both contracts pared losses after falling as much as 70 cents earlier when China, the world’s biggest crude importer, released data showing September imports fell 15% from a year earlier.
However, China, along with Europe and India, remains mired in coal and natural gas shortages that have pushed up prices for electricity generation fuels.
“The data is backwards-looking, but China’s energy shortages are very real in real-time,” Jeffrey Halley, a senior analyst at brokerage OANDA said.
“It will take a material fall in natural gas and coal prices to cap oil prices.”
China’s thermal coal prices surged to record highs on Wednesday as recent floods in key coal-producing province Shanxi worsened a supply crunch, just as new efforts by Beijing to liberalize power prices boosted demand from power generators.
“China is likely to buy more (crude oil) in the coming months as it seeks to resolve its energy crisis in any way possible and diesel may provide some relief on that,” said Howie Lee, an economist at Singapore’s OCBC bank.
Still, the International Monetary Fund on Tuesday cut its growth outlook for the United States and other major economies on worries supply chain disruptions and cost pressures are holding back a global economic recovery from the coronavirus pandemic.
A strong US dollar, trading near a one-year high, also weighed on oil prices, as it makes oil more expensive for those holding other currencies.
However, oil watchers are still focused on whether soaring gas and coal prices will lead to more demand for oil products for power generation.
Reuters
