Oil near stability, inflation fears counter with potential increase in Chinese demand

NEW YORK (Reuters) – Oil prices were close to flat during a volatile trading session on Thursday, as concerns about declining oil demand from inflation rivaled news that China was considering easing COVID-19 quarantine measures for visitors.

Brent crude futures fell 3 cents to settle at $92.38 a barrel.

US West Texas Intermediate crude for November delivery, which expires on Thursday, rose 43 cents to $85.98 a barrel. West Texas Intermediate crude for December delivery was down 1 cent at $84.51 a barrel.

Both Brent and West Texas Intermediate earlier rose more than $2 a barrel.

To fight inflation, the Fed is trying to slow the economy and will continue to raise its target interest rate in the short term, Philadelphia Fed President Patrick Harker said Thursday. Read more

The US dollar index pared its losses after the comments, which affected oil prices. A stronger dollar reduces oil demand by making fuel more expensive for buyers who use other currencies.

“Harker says the war on inflation is just beginning,” said Phil Flynn, an analyst at Price Futures Group in Chicago. “So it looks like the market has become nervous.”

Supporting prices, however, Beijing is considering reducing the quarantine period for visitors to seven days from 10 days, Bloomberg News reported Thursday, citing people familiar with the matter. Read more

“This is seen as a positive demand indicator for the market,” said Bob Yoger, director of energy futures at Mizuho in New York.

China, the world’s largest importer of crude, has adhered to the severe restrictions of Covid this year, which severely affected trade and economic activity, which led to a decrease in demand for fuel.

Also supporting prices were an imminent European Union ban on Russian crude and oil products, as well as production cuts from the Organization of the Petroleum Exporting Countries and allies including Russia, known as OPEC+.

OPEC+ agreed to cut production by 2 million barrels per day in early October.

Separately, US President Joe Biden announced a plan Wednesday to sell the remainder of his release from the nation’s Strategic Petroleum Reserve (SPR) by the end of the year, or 15 million barrels of oil, and begin refilling the stock as he attempts high damping. Gasoline prices ahead of the mid-term elections on November 8.

However, the announcement failed to ease oil prices, as official US data showed that the Strategic Petroleum Reserve fell last week to its lowest level since mid-1984, while commercial oil stocks fell unexpectedly.

(Covering by Stephanie Kelly in New York). Additional reporting by Ahmed Ghaddar in London and Emily Chow from Singapore. Editing by Margarita Choi, Kirsten Donovan and David Gregorio

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