Oil prices slide as hopes for China demand rebound fade (updated)

SUMITOMO CHEMICAL

07/11/2022 02:38

(Adds U.S. refining, updates prices)
    By Florence Tan
       SINGAPORE, Nov 7 (Reuters) - Oil prices fell more than
$1 a barrel on Monday after Chinese officials on the weekend
reiterated their commitment to a strict COVID containment
approach, dashing hopes of an oil demand rebound at the world's
top crude importer.
    Brent crude futures  LCOc1  dropped $1.20, or 1.2%, to
$97.37 a barrel by 0227 GMT, after hitting as low as $96.50
earlier. U.S. West Texas Intermediate crude  CLc1  was at $91.24
a barrel, down $1.37, or 1.5%, dropping to a session-low of
$90.40 a barrel earlier in the session.
    "Oil prices dropped sharply as the Chinese officials vowed
to stick to the COVID-zero policy while infected cases climbed
in China, which may cause more restrictions measures, darkening
the demand outlook," CMC Markets analyst Tina Teng said.
    A jump in the U.S. dollar is also weighing on oil prices,
she added.
    Four Federal Reserve policymakers on Friday indicated they
would still consider a smaller interest rate hike at their next
policy meeting despite strong jobs data.
    Brent and WTI rose last week, up 2.9% and 5.4%,
respectively, as rumours of a possible end to stringent COVID-19
lockdowns sent China's stock markets and prices of commodities
higher despite the lack of any announced changes.
    However, at a news conference on Saturday, health officials
said they will persevere with their "dynamic-clearing" approach
to COVID cases as soon as they emerge.
    Trade data from the world's No. 2 economy later on Monday
could show further cooling in exports as global demand continued
to soften.
    "The market is still dealing with signs of weakness in oil
demand from already high prices and the weak economic backdrop
in developed markets," ANZ analysts said in a note, adding
demand in Europe and the United States have fallen back to 2019
levels.
    "We now expect global demand in Q4 2022 to grow by only 0.6
mb/d (millions of barrels per day) from the same quarter last
year and to moderate next year."
    Oil prices are underpinned by expectations of tighter
supplies as the European Union's embargo on Russia's seaborne
crude exports will start on Dec. 5 while refineries worldwide
are ramping up output to meet strong diesel demand.
        
    U.S. oil refiners
     this quarter will run their plants at breakneck rates, near
or above 90% of capacity, while China's largest private refiner
Zhejiang Petroleum and Chemical Co (ZPC) is raising diesel
output. 
        Kuwait Integrated Petroleum Industries Co (KIPIC) said
on Sunday the first phase of the Al-Zour refinery has started
commercial operations, according to state news agency (KUNA).
 (Reporting by Florence Tan; Editing by Lincoln Feast and
Kenneth Maxwell)
 ((Florence.Tan@thomsonreuters.com; Reuters Messaging:
florence.tan.thomsonreuters.com@reuters.net))