Oil Continues to Decline as Demand Concerns Outweigh OPEC+ Cut

On Wednesday, oil prices declined further, wiping away all of the week's gains, as fears over slow crude demand overshadowed what was viewed as a minimal supply cut by OPEC+.

Brent oil futures traded in London declined 0.5% to $92.39 per barrel, while U.S. West Texas Intermediate crude oil futures declined 0.5% to $86.41 per barrel as of 20:29 ET (00:29 GMT). On Tuesday, both contracts declined by 3% and 2.4%, respectively.

New COVID lockdowns in China look to be the most worrisome factor for crude consumption, considering China's substantial oil imports. The government just extended the lockdown in Chengdu, a city in the southwest of China.

Later in the day, Chinese trade data is anticipated to shed further light on the nation's crude consumption.

In addition, the strength of the U.S. currency due to rising expectations of additional interest rate hikes by the Federal Reserve weighs on oil prices. A rising dollar increases the cost of importing crude, which has a knock-on effect on demand.

Given the recent fall of the rupee and rupiah, major importers like India and Indonesia are already under pressure to reduce their crude demand.

A 100,000-barrel-per-day production cut by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) was mostly overshadowed by concerns over sluggish demand and a strong dollar. The number represents 0.1% of daily worldwide demand and was largely regarded as symbolic. Even still, oil prices rose momentarily in response to the cut.

Saudi Arabia, the chairman of the Organization of the Petroleum Exporting Countries (OPEC), had pledged to maintain petroleum prices by reducing production.

Additional oil production from Russia, which has pledged to expand exports to Asia in reaction to U.S. and European price limitations, is also anticipated to impact crude prices.

As winter approaches, it is anticipated that the demand for U.S. crude oil would decrease as well. However, gasoline demand in the United States has increased in recent weeks as fuel costs have declined.

After Russia cut off a key gas supply to the European Union, a building energy crisis in Europe is projected to raise oil consumption this winter. In the fourth quarter, several members of the bloc are likely to switch to heating oil.