OPEC's Demand Projection And China's COVID Cases Lower Oil Prices

OPEC lowered its global demand forecast for 2022, and rising COVID-19 cases in China cast doubt on the future of China's gasoline consumption, the largest crude importer in the world.

Brent crude futures fell 39 cents, or 0.4%, to $92.75 a barrel at 01:33 GMT on Tuesday, after falling 3% on Monday. The price of a barrel of U.S. West Texas Intermediate crude was $85.31, down 56 cents, or 0.7%, following a 3.5% decline in the prior session.

The Organization of Petroleum Exporting Countries (OPEC) has lowered its forecast for the growth of global oil demand in 2022 for the fifth time since April, citing escalating economic concerns such as high inflation and rising interest rates.

This follows the announcement by the International Monetary Fund on Sunday that the global economic outlook is gloomier than anticipated a month ago, citing a gradual deterioration in purchasing manager surveys over the past few months.

While investors applauded China's announcement last week that it will relax its strict zero-COVID policy in order to stimulate economic growth and energy demand, ANZ analysts stated that rising case numbers remain a significant risk.

"The market is currently defying looming supply threats," analysts added, referring to impending sanctions on Russian oil exports by the European Union.

In its monthly productivity report, the U.S. Energy Information Administration (EIA) stated on Monday that oil production in the Permian Basin is expected to reach a new high of 5.49 million barrels per day (bpd) in December.

However, aging shale regions are exhibiting decreased per-well performance, which according to the EIA resulted in only a 91,000 bpd increase in U.S. crude oil production in shale regions in December despite a price increase.