Oil decline on US inventories and hopes for a recovery in Chinese demand

Oil prices fell on Wednesday, adding slightly to losses in the previous session, as rising US crude inventories and fears of a global recession offset optimism about a recovery in demand in China.

Crude oil prices have risen this year amid China ending anti-coronavirus restrictions and hopes the Federal Reserve will stop raising interest rates soon.

However, some analysts said that the speed of recovery in actual demand in China appears uncertain.

Brent crude was down six cents at $86.07 a barrel by 0820 GMT, after falling 2.3 percent in the previous session.

US West Texas Intermediate crude also fell 40 cents, or 0.5%, to $79.73, after falling 1.8% on Tuesday.

The decline in prices was affected by a report issued on Tuesday about an increase in US crude stocks by about 3.4 million barrels in the week ending January 20, according to market sources citing data from the American Petroleum Institute.

Concerns about an economic slowdown also affected oil prices.

Data on Tuesday showed US business activity contracted in January for the seventh straight month.

Official data on inventories will be released from the US Energy Information Administration at 1530 GMT.

Oil supply is supposed to remain stable over the medium term, as the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, are expected to maintain their production quotas.

Five OPEC+ sources said on Tuesday that the OPEC+ committee is likely to endorse the group’s current oil production policy when it meets next week, as hopes for an increase in Chinese demand are balanced against concerns about inflation and the global economy.