Oil falls for fourth consecutive day as China COVID concerns grow

The manufacturing hub of Guangzhou, a city of 19 million people, on Thursday reported more than 2,000 new cases for Nov. 9, the third day above that level, in the city's worst outbreak so far. Millions of residents were told to get tested for COVID-19 on Wednesday, and one city district has been locked down, as local cases across China reached their highest since April 30.

Adding to market gloom was a big build in US crude inventories reported on Wednesday.

"Unfortunately for oil bulls, that was only the tip of the iceberg, as a run of bearish economic headlines put China in the headlights as a spike in local COVID cases weighs like an anvil on oil markets," SPI Asset Management managing partner Stephen Innes said in a note.

Crude oil stockpiles rose by 3.9 million barrels last week, the US Energy Information Administration said, taking inventories to their highest since July 2021.

However, gasoline inventories fell by 900,000 barrels to their lowest since November 2014 and distillate stockpiles fell by 500,000 barrels.

Bearishness around the rise in US crude oil stockpiles may have been overdone, Commonwealth Bank analyst Vivek Dhar said.

He noted that distillate stockpiles, which include diesel, heating oil and jet fuel, fell to their lowest in a decade and the number of days those inventories can meet expected demand is at 26, nearly five days below the five-year average, "indicating much tighter conditions than US oil or gasoline markets".

In a note to clients, Dhar forecasts that Brent will average about $95 a barrel in the fourth quarter as oil markets will tighten following the implementation of the European Union's planned ban on Russian seaborne oil imports starting on Dec. 5 in response to Russia's invasion of Ukraine.