Oil Falls Further on Looming Surplus, China Demand Constraints - Bloomberg

Oil Falls Further on Looming Surplus, China Demand Constraints - Bloomberg

PRICES:

West Texas Intermediate for January delivery dropped 1.1% to $69.93 a barrel at 8:32 a.m. local time after falling 0.8% on Tuesday. Brent for February settlement slumped 1% to $72.98 a barrel. Brent’s prompt timespread was at 8 cents a barrel in backwardation after briefly flipping into contango on Tuesday. Oil declined for a third day as global markets tip into a supply surplus, with demand pressured by the spread of the omicron Covid-19 variant worldwide and Chinese constraints on fuel use. Futures slid 1.1% in New York amid a growing conviction that inventories are starting to rise and will accumulate more rapidly next year amid curbs on travel, a view adopted by the International Energy Agency on Tuesday. The outlook is deteriorating further on signs that demand in China -- the world’s biggest importer of crude -- is coming under pressure as the government limits holiday travel to contain the virus, while also cracking down on pollution. Refiners are expected to replenish inventories hesitantly this winter. “Supply has finally caught up with demand and this trend is forecast to intensify heading into 2022,” said Stephen Brennock, an analyst at brokerage PVM Oil Associates Ltd. “Simply put, the oil market faces a significant oversupply next year.”