By Laura Sanicola
(Reuters) -Oil prices fell on Wednesday, pressured by low economic activity in leading crude importer China and a surprise build in U.S. crude inventories as oil producers ramped up output after following frigid weather earlier this month.
Prices were also pressured after U.S. Energy Information Administration data showed weekly crude inventories rose by 1.2 million barrels last week, compared with analysts’ expectations for a 217,000 barrel draw.
Brent crude futures for March, which expire today, fell 78 cents, or about 0.9%, to $82.09 a barrel by 11:01 a.m. EST (1601 GMT). The more actively traded April contract was down $1.00, or about 1.2%, at $81.50.
U.S. West Texas Intermediate crude futures lost $99, or roughly 1.3%, to $76.83. Both benchmarks fell by more than $1 a barrel earlier in the session.
U.S. refiners emerged from output cuts driven by cold weather, U.S. crude runs fell to their lowest level since January 2023, as refinery utilization rates dipped by 2.6 percentage points in the week to 82.9%, according to the EIA.
“Refiners are going to be in no hurry to rush back to levels above 90%,” said Bob Yawger, director of energy futures at Mizuho.
Manufacturing activity in China, the world’s second-largest economy, contracted a fourth straight month in January, an official factory survey showed on Wednesday.
The latest sign of the country’s broader economy struggling to regain momentum came days after a court ordered the liquidation of troubled property developer China Evergrande. The real estate sector accounts for a quarter of China’s GDP.
Major forecasters, including the Organization of the Petroleum Exporting Countries (OPEC), see oil demand growth in 2024 driven primarily by Chinese consumption.
“The factory data confirms our view that China, at least for now, is an impediment to global oil demand growth,” said Tamas Varga of oil broker PVM.
In other demand-dampening news, U.S. policymakers are expected to keep interest rates unchanged this week. Economist predictions suggest that a cut is unlikely before June, given continuing strength in household spending and uncertainty over the economic outlook.
The Israel-Hamas war, meanwhile, has expanded to a naval conflict in the Red Sea between the United States and Iran-aligned Houthi militants.
While that has disrupted oil and natural gas tanker shipping, which is driving up delivery costs and starting to affect oil supplies, a Reuters poll suggested that record production in the West and slow economic growth will keep a lid on prices and limit any geopolitical risk premium.
“The main issue with turning outright bullish on crude oil here is the technical picture remains bearish and is yet to catch up with recent events,” including a deadly drone attack on U.S. troops near the Jordan-Syria border last week, said IG market analyst Tony Sycamore.
Yemen’s Iran-aligned Houthi group on Wednesday said it would keep up attacks on U.S. and British warships in the Red Sea in what it called acts of self defence, stoking fears of long-term disruption to global trade.
Meanwhile, Israel’s offensive in Gaza persisted, though Palestinian militant group Hamas said it was studying a new proposal for a ceasefire and release of hostages in Gaza.
On the supply side, OPEC oil output in January registered the biggest monthly drop since July, a Reuters survey found, as several members implemented new voluntary production cuts agreed with the wider OPEC+ alliance and unrest curbed Libyan output.
The Organization of the Petroleum Exporting Countries) pumped 26.33 million barrels per day (bpd) this month, down 410,000 bpd from December, the survey found. December’s total strips out Angola, which has left OPEC.
(Reporting by Natalie Grover, Colleen Howe and Muyu XuEditing by David Goodman and David Evans)
Disclaimer: This report is auto generated from the Reuters news service. ThePrint holds no responsibilty for its content.