Oil prices edge down as dollar firms, China COVID worries about falling demand

SINGAPORE, Oct 11 (Reuters) – Oil prices fell on Tuesday, extending losses of nearly 2% in the previous session, as a stronger U.S. dollar and a surge in COVID-19 cases in China led raised fears of a slowdown in global demand.

Brent crude futures fell 27 cents, or 0.3%, to $95.92 a barrel at 0342 GMT, after falling $1.73 in the previous session.

U.S. West Texas Intermediate crude was at $90.73 a barrel, down 40 cents, or 0.4%, after losing $1.51 in the previous session.

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The dollar rose on Tuesday as worries about rising interest rates and geopolitical tensions unsettled investors.

A strong greenback reduces demand for oil by making it more expensive for buyers using other currencies.

Rate hikes to date were beginning to slow the economy and the full weight of tighter policy would not be felt for months, Fed Vice Chairman Lael Brainard said Monday. Read more

“Strong jobs data bolstered expectations of another 75 basis point rate hike at the Fed meeting next month, leaving downside risk to global oil demand,” said ANZ Research analysts in a note.

China’s sustained zero COVID-19 policy ahead of the Communist Party Congress is “not helping” demand, analysts added.

COVID-19 cases in the world’s second-largest oil consumer have risen to their highest level since August. Its services business in September contracted for the first time in four months as pandemic restrictions weighed.

Thousands of cases caused by the highly transmissible subvariants of Omicron BF.7 have been reported in Inner Mongolia since early October, making the region the country’s latest COVID epicenter. Read more

Capping losses, the Organization of the Petroleum Exporting Countries and its allies, including Russia, known as OPEC+, decided last week to lower their production target by 2 million barrels per day, prompting more worries about tight oil supplies.

“More critical is the bullish signal that OPEC+ is sending here by responding to short-term market momentum and trying to stabilize or raise prices despite the average view that demand growth will outpace demand growth. supply for the remainder of the year,” said Stephen Innes, managing partner. at SPI Asset Management.

“We’re back on the seesaw trying to weigh this week’s economic demand malaise against the tight market,” Innes added.

EU sanctions on Russian crude and petroleum products will come into effect in December and February respectively, while the bloc last week gave final approval for a new batch of sanctions against Russia, including a cap on prices on Russian oil exports. Read more

India is maintaining a “healthy dialogue” with Russia and will consider what is on offer following an announced ownership overhaul of the Sakhalin-1 oil and gas project, Oil Minister Hardeep Singh Puri told Reuters. Read more

On Friday, Russia issued a decree allowing it to seize Exxon Mobil’s 30% stake and gave a Russian state-owned company the power to decide whether foreign shareholders, including India’s ONGC Videsh, can keep their stake in the project.

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Editing by Gerry Doyle and Jacqueline Wong

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