Oil prices edged down yesterday as expectations grew that oil demand growth will fall as inflation and supply chain issues strain major economies, though surging prices for power generation fuel limited losses.
Brent crude futures fell 58 cents, or 0.7 per cent, to $82.84 a barrel. U.S. West Texas Intermediate (WTI) crude futures fell 48 cents or 0.6 per cent to $80.16 a barrel.
Weighing on prices, China, the world’s biggest crude importer, released data showing September imports fell 15 percent from a year earlier.
China, along with Europe and India, remains mired in coal and natural gas shortages that have pushed up prices for the fuels burned for electricity generation and are leading to oil products being used as substitute.
“There are growing expectations that the high prices for gas and thermal coal are likely to boost demand for alternative fuels such as diesel and fuel oil,” ANZ Research analysts said in a note.
The bigger issue for the markets, however, is the impact of the energy crisis, especially in China, the world’s second biggest economy, on oil demand.
“These are troubling times for China. A severe energy crisis is gripping the country,” said Stephen Brennock of broker PVM.
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 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.
The market is awaiting US oil inventory data, delayed by a day following the Columbus Day holiday on Monday.