Oil price settles lower as Chinese developer downgrades add to fears about demand outlook
NEW YORK: Oil prices stabilized on Thursday amid fears over the economic outlook of the biggest oil importer following lower ratings at two Chinese real estate developers, and after some governments took action to tackle the Omicron variant of the coronavirus.
Brent crude futures stabilized at US $ 1.40, or 1.9%, at $ 74.42 per barrel, falling from a session high of $ 76.70. US West Texas Intermediate (WTI) crude futures fell $ 1.42, or 2%, to $ 70.94 after peaking at $ 73.34.
Rating agency Fitch downgraded property developers China Evergrande Group and Kaisa Group to ‘narrow default’ status on Thursday, saying they had defaulted on offshore bonds, while a source said Kaisa had started to work on restructuring its $ 12 billion offshore debt.
The news “exacerbates fears of Chinese GDP growth and could ultimately have an impact on the oil– the buying appetite of the world’s largest crude oil customer, “said Louise Dickson, analyst at Rystad Energy.
British Prime Minister Boris Johnson on Wednesday imposed tighter COVID-19 restrictions on England, saying people should work from home where possible, wear masks in public places and show vaccine passes COVID-19 to access certain events and locations.
“Although laboratory tests have shown that the Pfizer vaccine has a neutralizing effect on Omicron (…) new measures are being introduced to try to stop the spread of the virus,” said Tamas Varga of oil PVM brokerage.
Denmark is also planning new restrictions, including closing restaurants, bars and schools, while China has suspended group tourist trips from Guangdong.
South Korea has seen record infections while cases remain high in Singapore and Australia.
The number of Americans filing new jobless claims fell to its lowest level in more than 52 years last week due to a severe shortage of workers, new data from the US Department of Labor shows .
“The oil The market doesn’t always respond well to good economic news either, as it could prompt the Federal Reserve to tighten monetary policy, ”said John Kilduff, partner at Again Capital LLC in New York.
The markets were supported by comments from BioNTech and Pfizer that a three-shot course of their COVID-19 vaccine could protect against infection with the Omicron variant.
The Omicron outbreak triggered a 16% drop in Brent prices from November 25 to December 1. More than half of the decline was recouped this week, but analysts say a further recovery may be limited until Omicron’s impact is clearer.
US inventory data released Wednesday also weighed on prices.
Data from the Energy Information Administration (EIA) showed that crude inventories fell by 240,000 barrels last week, far less than analysts in a Reuters poll had predicted, with stocks at the delivery center of Cushing in Oklahoma increasing by 2.4 million barrels.
Fuel inventories also rose by 6.6 million combined barrels, data shows – Reuters