OIL SLIPS AS TENSIONS EASE

OIL FELL yesterday as geopolitical tensions eased slightly and rising numbers of Covid-19 cases in China added to worries over demand in the world’s largest crude importer.

Poland and Nato on Wednesday said a missile that crashed inside Nato member Poland was probably a stray fired by Ukraine’s air defences and not a Russian strike, easing fears of the war between Russia and Ukraine spilling across the border.

“Thankfully, those fears have abated and the situation de-escalated, which has seen oil gains unwound,” said Craig Erlam, senior market analyst at Oanda. “China remains a downside risk for oil in the near term.”

Brent crude fell $2.13 to $90.73 (about R1 567) a barrel, a 2.3% loss, by 5:58pm. US West Texas Intermediate (WTI) crude slid $2.87, or 3.4%, to $82.72 a barrel.

China reported rising daily Covid19 infections and Chinese refiners have asked to reduce Saudi crude volume in December, Reuters has reported, while also slowing Russian crude purchases.

“Struggling Chinese consumption is embodied in sinking domestic need for both Russian and Saudi crude oil,” said Tamas Varga of oil broker PVM.

While China’s Covid caseload is small compared with the rest of the world, it maintains stringent policies to quash outbreaks before they spread, dampening fuel demand.

Adding to the pressure, the dollar rose as investors digested mixed US economic data. A stronger dollar makes dollar-denominated oil more expensive for holders of other currencies.

St. Louis Federal Reserve president James Bullard said a basic monetary policy rule would require rates to rise to at least around 5%, while stricter assumptions would recommend rates above 7%.

Oil gained support from official figures that US crude stocks fell by a bigger than expected 5 million barrels in the most recent week. I Reuters