Oil prices edge lower as China COVID-19 woes dampen demand

Oil prices inched lower on Tuesday, extending losses of 1% from the previous session as more extensive COVID-19 curbs in China increased fears of slowing fuel demand in the world’s second-largest oil consumer.

Brent crude for January delivery was down 4 cents at $92.77 a barrel at 0112 GMT. The December contract expired on Monday at $94.83 a barrel, down 1%.

U.S. West Texas Intermediate (WTI) crude fell 18 cents, or 0.2%, to $86.35 a barrel.

COVID-19 curbs in top crude oil importer China forced the temporary closure of Disney’s Shanghai resort on Monday, while production of Apple Inc iPhones at a major contract manufacturing facility could drop by 30% in November.

“With China sticking to the zero-COVID policy, the oil demand outlook overshadowed a record of U.S. oil export data from last week,” CMC Markets analyst Tina Teng said.

Strict pandemic restrictions have caused China’s factory activity to fall in October and cut into its imports from Japan and South Korea.

Also weighing on sentiment was the world’s largest independent oil trader Vitol saying that its sees signs of oil demand destruction, ANZ Research analysts said in a note.

Pressuring oil prices, U.S. oil output climbed to nearly 12 million barrels per day (bpd) in August, highest since the start of the COVID-19 pandemic, even as shale companies said they do not expect production to accelerate in coming months.

That is likely to lead to a rise in U.S. crude oil stocks in the week to Oct. 28 of about 300,000 barrels, while distillate and gasoline inventories were expected to fall, a preliminary Reuters poll showed.

The poll was conducted ahead of reports from the American Petroleum Institute due at 4:30 p.m. EDT (2030 GMT) on Tuesday, and the Energy Information Administration due at 10:30 a.m. (1430 GMT) on Wednesday.

Brent and WTI benchmarks ended October higher, marking their first monthly gains since May after the Organization of the Petroleum Exporting Countries and its allies including Russia announced plans to cut output by 2 million bpd.

OPEC raised its forecasts for world oil demand in the medium-and longer-term on Monday, saying that $12.1 trillion of investment is needed to meet this demand despite the transition to renewable energy sources.

U.S. President Joe Biden has called on oil and gas companies to use their record profits to lower costs for Americans and increase production, or pay a higher tax rate.