By Adedapo Adesanya
Prices of the crude oil grades slipped on Wednesday after Russian oil shipments via the Druzhba pipeline to Hungary restarted, and rising COVID-19 cases in China weighed on sentiment.
Brent crude futures shrank by 1.1 per cent or $1 to $92.86 per barrel, as the United States West Texas Intermediate (WTI) crude futures decreased 1.5 per cent or $1.33 to settle at $85.59 a barrel.
The market gave up early gains after Hungarian Foreign Minister Peter Szijjarto said that flows through the Druzhba oil pipeline from Russia had resumed following a brief outage.
The disruption came as Russia on Tuesday night hit Ukraine with the heaviest missile strikes on cities and energy infrastructure since the start of the war as a rocket hit a Polish village close to the Ukrainian border, killing two people, in an incident that put Poland and its NATO allies on high alert.
Supply of Russian crude oil via the Druzhba pipeline to some countries in eastern and central Europe was suspended late on Tuesday, sending oil prices higher.
On Wednesday, oil prices were down, weighed by a firmer US Dollar and rising COVID-19 cases in China, which, despite a recent easing of some measures, continues to adhere to a strict COVID-curbing policy.
A stronger greenback makes riskier assets like oil more expensive for holders of other currencies.
Among the latest outbreaks in China, Guangzhou’s is the largest, with new daily infections of COVID-19 topping 5,000 for the first time and fuelling speculation that localised lockdowns could widen.
China is scrambling to limit the damage of its zero-COVID policy nearly three years into the pandemic, as the latest economic reports showed retail sales fell in October and factory output grew more slowly than expected.
There was some support as the Energy Information Administration (EIA) said US crude inventories fell by 5.4 million barrels last week, compared with expectations for a 440,000-barrel drop.
Also, Iraq plans to raise its production capacity to around 7 million barrels a day in 2027, state-owned oil marketer SOMO said, although any increases will be in coordination with the Organisation of the Petroleum Exporting Countries (OPEC).
The International Energy Agency (IEA) forecasts demand growth to slow to 1.6 million barrels per day in 2023 from 2.1 million barrels per day this year.
Modupe Gbadeyanka