Oil fell 5% as concerns about global growth and China fueled the decline. By Investing.com
By Barani Krishnan
Investing.com — Worries about global growth have increased since the start of the year, with China, the biggest importer of the commodity, facing problems with lower oil prices. Contagion of COVID-19.
U.S. crude for February delivery fell $3.50, or 4.6%, to $73.43 a barrel at $72.91 a barrel at 11:55 a.m. ET (4:55 GMT), a three-week low. WTI, as the U.S. crude oil benchmark is called, has fallen nearly 9% in just two trading days since the start of 2023, after ending last year with a 6.7% gain.
British crude oil for February delivery fell $3.71, or 4.5%, to $78.39 a barrel after hitting a three-week low of $77.91. Like WTI, Brent ended 2022 up 10.5%, down about 9% since two trading days this year.
“I was looking yesterday for a new day and a new year and it looks a lot like the fourth quarter of 2022,” said Scott Shelton, energy futures broker at ICAP in Durham. North Carolina. “The market is defenseless against selling.”
As the world begins to recover from the worst of the coronavirus pandemic, concerns about each country’s progress being determined by its relative immunity to the virus and its unique economic strength are not entirely new.
In the case of China, hundreds of millions of people are estimated to be at risk of contracting the coronavirus before herd immunity is achieved in the world’s second-largest economy. So China’s eagerness to move from a zero-covid policy to one where officials are urging people to declare “final victory” over the virus has unsettled markets.
Concerns about Beijing’s actions have grown since the International Monetary Fund began with a stark warning that China and the other two engines of global growth — the United States and Europe — are all in slowdown mode. Data released on Tuesday showed China’s manufacturing activity contracted for a fifth straight month in December as the country grapples with an unprecedented spike in coronavirus cases.
China also raised export quotas for the first batch of refined petroleum products for 2023, pointing to expectations of weak domestic demand.
Signs that major oil exporter Saudi Arabia may cut the price of its Arab Light crude destined for Asia further in February after this month hit a 10-month low, reflecting concerns about oversupply, pushing the market further. helped lead. According to Reuters, it has fallen.
In the United States, all eyes are on the December non-farm payrolls report due on Friday. The jobs report is the first high-profile release of 2023 ahead of next week’s larger consumer price index (CPI) report.
The non-farm payrolls report is key as the Federal Reserve faces a dilemma: continue monetary tightening to bring inflation back down, or leave aggressive rate hikes to keep the economy from slowing. Rising inflation and interest rates have hit the housing sector and could further hit the labor market, which has shown stunning growth over the past two years since the world emerged from the worst pandemic. On the other hand, eight nonfarm payrolls reports beat economists’ estimates, so another positive surprise cannot be ruled out.
Economists expect a gain of 200,000 jobs in December, down from the 263,000 jobs reported for November, but still extremely healthy by U.S. labor market standards. Before the pandemic, American jobs were growing by less than 200,000 a month.
Market participants were also looking for weekly US oil inventory data to be released after market adjustment by the API or American Petroleum Institute.
API will publish final US crude oil, gasoline and distillate inventories for the week ending December 30 at around 4:30 PM ET (9:30 PM GMT). The numbers serve as a precursor to official inventory data for the same week to be released Thursday by the U.S. Energy Information Administration.
Analysts tracked by Investing.com last week expected the EIA to report crude oil inventories at 2.227 million barrels, compared with an increase of 718,000 barrels in the week to May 23. December.
On the front, consensus calls for a 1.5 million barrel cut, on top of the 3.105 million barrel cut recorded the previous week.
A decline of 1.833 million barrels is expected, compared with an increase of 282,000 the previous week.