WTI bounces up despite risk off mood

Oil prices are trimming their losses after bouncing up from the $82.55 level. There are concerns about the Chinese zero-COVID policy. Such concerns do hurt crude oil.

The lower US oil reserves have avoided a further decline in prices. WTI futures have picked up following the negative market opening on Monday. The WTI crude retreated to $82.55 lows on the Asian and early European sessions to cut losses during the US session and return to the $84.65 area at the time of writing.

The confirmation by Chinese President Xi Jinping for a third time over the weekend hit crude prices. Investors are worried that his commitment to the Zero-COVID policy could result in new lockdowns in China and that will eventually depress demand for oil from the world’s major importer.

In such a scenario, the positive Chinese GDP, which has shown a 3.9% yearly growth in the third quarter, beating market expectations of a 3.4% increase, has been practically unobserved,

On the other hand, a European ban on Russian crude oil, expected to come into effect as of next December, as part of a new set of sanctions, for the Ukrainian war, is providing some support, as the eurozone leaders struggle to find alternative providers ahead of the winter.

official data revealed last week that the US Strategic Petroleum reserves declined to their lowest level since 1984 in the week of October 14th, while the EIA reported a 1.725M decline in crude oil inventories in the same week. These figures worked to avoid a sharper decline in crude prices.

It is worth noting that oil prices fell early on Monday, after getting impacted by an overall gloomy market sentiment about the economy, the stronger US dollar, and mixed data out of China. At the start of this week, oil prices were lower as market participants were looking at macroeconomic data and upcoming central bank meetings.

With important central bank meetings ahead, the oil market will likely trade on risk sentiment and the US dollar this week. In China, increased fuel export quotas and robust export demand pushed its overseas shipments of refined products surging by 36% annually in September to the highest level since June last year.

China, however, saw its crude oil imports drop by 2% year over year in September, to around 9.79 million barrels per day (bpd), according to data from the Chinese General Administration of Customs cited by Reuters. The crude import volumes were higher than the August 2022 intake of 9.5 million bpd, the data showed.

The decline in oil prices early on Monday was also dragging lower the major stock markets in the Middle East. The Saudi stock exchange was on track to close down after two consecutive trading sessions of gains.