Markets

Oil down more than 1% on Chinese fuel demand doubts, OPEC supply concerns

Reuters | Updated on March 02, 2021

Brent crude settled at $63.69 a barrel, falling 73 cents, or 1.1 per cent

New York, March 1 Oil prices fell more than 1 per cent on Monday as fears that Chinese oil crude consumption is slowing and that OPEC may increase the global supply following a meeting this week.

Brent crude settled at $63.69 a barrel, falling 73 cents, or 1.1 per cent, and US West Texas Intermediate (WTI) crude settled at $60.64 a barrel, losing 86 cents, or 1.4 per cent.

China's factory activity growth slipped to a nine-month lowin February, sounding alarms over Chinese crude buying andpressuring oil prices.

"There's some talk that their strategic reserves are filled up, and so some people are betting against the Chinese continuing to drive oil prices," said Phil Flynn, senior analystat Price Futures Group in Chicago.

Investors were also concerned that the Organization of thePetroleum Exporting Countries and its allies, a group known as OPEC+, would soon increase oil output.

"The worry is that that's going to end up adding as much as1.5 million barrels to the market," said Bob Yawger, director of energy futures at Mizuho. "They have to construct some kind of story to bring those barrels back."

OPEC oil output fell in February as a voluntary cut by Saudi Arabia added to agreed reductions under a pact with allies, a Reuters survey found, ending a run of seven consecutive monthlyincreases.

The group meets on Thursday and could discuss allowing as much as 1.5 million barrels per day of crude back into themarket.

ING analysts said OPEC+ needs to avoid surprising traders by releasing too much supply.

"There is a large amount of speculative money in oil at the moment, so they will want to avoid any action that will see(those investors) running for the exit," the analysts said.

A stronger US dollar, which typically moves inversely withoil, also weighed on oil.

Rising COVID-19 vaccinations stirring up economic activity along with a $1.9 trillion coronavirus-related relief package passed by the US House of Representatives on Saturday kept prices from sinking lower.

Oil prices rose earlier in the session on hopes tied to the proposed U.S. stimulus package would pay for vaccines and medical supplies, and send a new round of emergency financialaid to households and small businesses, which will have a directimpact on energy demand.

The approval of Johnson & Johnson's COVID-19 shotalso buoyed the economic outlook.

Published on March 02, 2021

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