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Oil eases as investors eye US oil release, China demand concernsChina, the No. 2 oil consumer globally, has suspended some international flights and stepped up efforts to rein in a virus outbreak at Tianjin
Reuters
Last Updated IST
Several banks have forecast oil prices to hit $100 a barrel later this year as demand is expected to outstrip supply. Credit: Reuters Photo
Several banks have forecast oil prices to hit $100 a barrel later this year as demand is expected to outstrip supply. Credit: Reuters Photo

Oil prices eased for a second session on Friday on growing concerns that Washington may soon act to cool prices, while movement controls in China to rein in a COVID-19 outbreak weighed on fuel demand.

Brent crude futures fell 30 cents, or 0.4 per cent, to $84.17 a barrel at 0150 GMT. US West Texas Intermediate crude was down 45 cents, or 0.6 per cent, at $81.67 a barrel.

China, the No. 2 oil consumer globally, has suspended some international flights and stepped up efforts to rein in a virus outbreak at Tianjin while the highly transmissible Omicron variant has spread to the northeastern city of Dalian.

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Many cities, including Beijing, have also urged people to stay put during the Lunar New Year holiday, which could cool demand for transport fuel during a peak travel season.

"Market is a bit toppish," said Avtar Sandu, a commodities manager at Phillip Futures in Singapore, adding that reports on the Covid-19 situation in China and the sale of strategic petroleum reserves (SPR) in the United States were a concern.

The US Energy Department said on Thursday it had sold 18 million barrels of strategic crude oil reserves to six companies, including Exxon Mobil and a unit of refiner Valero Energy Corp.

Nevertheless, Brent and WTI prices are set to climb for a fourth week in a row, supported by supply concerns in Libya and Kazakhstan and a drop in US crude inventories to 2018 lows. Some investors are also optimistic that Omicron's impact on the global economy and oil demand will be short-lived.

Several banks have forecast oil prices to hit $100 a barrel later this year as demand is expected to outstrip supply.

"The short-term outlook still has many risks, but optimism is high that it will be short-lived," OANDA's analyst Edward Moya said in a note.

However, with oil prices above $80 a barrel, there is growing political pressure for the White House to lobby OPEC+ to hit their production quotas, he said.

"Biden may resort to another SPR release and while that won't solve any problems, it could send WTI crude down to the $80 level," Moya said.

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(Published 14 January 2022, 08:57 IST)