Oil futures lost ground Tuesday, with prices set to post a second straight session decline, as investors remained uncertain about the outlook for crude demand from China.
West Texas Intermediate crude for December delivery
fell 42 cents, or 0.5%, $91.37 a barrel on the New York Mercantile Exchange after posting a loss of 0.9% on Monday.
December natural gas
dropped 9.8% to $6.269 per million British thermal units after getting a colder weather related boost to settle 8.5% higher on Monday.
Oil futures have been buffeted by uncertainty around China’s zero-COVID policy, which has been seen keeping a lid on crude prices.
Oil was lifted last week on rumors circulating on Chinese social media that officials were weighing a relaxation of the policy. Weekend news reports saw officials deny speculation around easing restrictions, but crude was lifted early Monday after The Wall Street Journal reported Chinese leaders were considering steps toward reopening, but were proceeding slowly and had no timeline.
Those gains were given back by the closing bell.
“The lack of a concrete timeline or any real details about plans to reopen the Chinese economy and move away from the still very strict and economically crippling restrictions weighed on the energy market into the afternoon,” wrote analysts at Sevens Report Research.
For now, however, the near-term trend still favors the bulls, they said. The $93.20 closing high for WTI from October is a key resistance level keeping crude in a trading range between roughly $78 and $93 a barrel, they said.
“This week, midterm election results, CPI data (if it’s dovish), or further developments in China regarding COVID restrictions could help drive futures through resistance and to new multimonth closing highs,” they wrote.
Traders also await the weekly U.S. petroleum supply report from the Energy Information Administration due Wednesday morning.
On average, analysts expect the EIA report to show supply declines of 700,000 barrels for crude, 1.2 million barrels for gasoline, and 900,000 barrels for distillates, according to a survey conducted by S&P Global Commodity Insights.
“Inventory numbers should be in focus this week as the U.S. will aim to extend last week’s small increase to distillate stocks, which remain persistently low,” said Robbie Fraser, manager, global research and analytics at Schneider Electric, in a daily note.
“Strong export demand has kept diesel in short supply, and some additional inventories would be welcomed ahead of a heating season that could carve out more room for diesel as global natural gas supply remains tight,” said Fraser.