Oil Dips Again As Concerns Shift To Questionable Pledges From China

Meanwhile, growth in U.S. inventories is anticipated: File Image/Pixabay

Crude traders on Tuesday extended oil's losses, shifting their concerns from the Organization of the Petroleum Exporting Countries' (OPEC) output cuts to focus on doubts about China's economic health.

Brent fell 75 cents to $82.05 per barrel by 1712 GMT, while West Texas Intermediate fell 58 cents to $78.16 per barrel.

Traders were unimpressed with China's pledge to "transform" its economic development model and curb industrial overcapacity, while targeting 5 percent for economic growth this year, according to an official work report released on Tuesday.

China also stated it would increase oil and gas exploration but at the same time tighten control of fossil fuel consumption.

Adding to traders' concerns was a Reuters survey of four analysts estimating that U.S. crude inventories rose by about 2.6 million barrels in the week to March 1.

By contrast, rising spot prices showed that the crude market is tightening overall, and ANZ analysts write in a note that "While tensions in the Middle East have yet to directly impact supply, the Red Sea disruptions have increased the time oil is unavailable to the market."

Further impacting sentiment on Tuesday was anticipation of Federal Reserve chair Jerome Powell's testimony in Washington: Dennis Kissler, senior vice president at BOK Financial, said, "The anticipation of the Fed chairman holding interest rates steady into mid-year is a pressure point to crude prices….higher interest rates will keep the U.S. dollar elevated, which is a headwind for crude exports."

Completely overlooked on Tuesday was earlier news that OPEC and its allies would extend  their crude production cuts of 2.2 million barrels per day (bpd) into the second quarter to support prices and counter the effects of rising output elsewhere; Saudi Arabia vowed to extend its cut of 1 million bpd through the end of June.