Crude Oil Dips Amid Chinese Worsening Outbreaks, US Midterm Elections

November 9, 2022
Crude Oil Production

By Adedapo Adesanya

Crude oil depreciated on Tuesday amid growing worries about fuel demand as COVID-19 outbreaks worsened in top crude importer, China, and jitters about the outcome of midterm elections in the United States.

The Brent crude was sold at $96.78 a barrel yesterday after losing $1.14 or 1.2 per cent, while the US West Texas Intermediate (WTI) crude went for $90.37 per barrel after it fell by $1.42 or 1.6 per cent.

A combination of strict COVID-19 containment measures hobbling factories, and a global economic slowdown has affected China’s trade position. New cases have surged in Guangzhou and other Chinese cities, dimming prospects for fewer restrictions.

China’s commitment to blanket lockdowns to stop the spread of the virus has disrupted production, forcing down factory output and leaving Chinese exporters with fewer goods to ship abroad.

In the opening session on Monday, both benchmarks hit their highest since August on reports that leaders in China were weighing an exit from the country’s strict COVID-19 restrictions.

Now, new locally transmitted infections climbed to 7,475 on November 7, according to China’s health authority, up from 5,496 the day before and the highest since May 1, with Guangzhou accounting for nearly a third of the new infections.

Analysts warn that the sharp rebound will test China’s ability to keep its COVID measures and could dampen investors’ hopes that the world’s second-largest economy could ease curbs and restrictions soon.

In the US, the market will be looking at the US midterms and their likely impact. Democrats are trying to cling to their majorities in Congress for the final two years of President Joe Biden’s first term as Republicans are favoured to win control of the House, while the race for Senate control appears tight.

The Energy Information Agency (EIA) on Tuesday cut its US energy demand outlook for 2023 and said the country’s production forecast for the next year would be 21 per cent lower than it previously expected.

The market will be looking ahead to the European Union’s ban on Russian oil, imposed in retaliation for Russia’s invasion of Ukraine, set to start on December 5 and will be followed by a halt on oil product imports in February 2023.

Adedapo Adesanya

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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