Oil prices dipped on Wednesday as the Chinese government stepped up measures to control record high coal prices and guarantee coal mines work at total capacity as part of Beijing’s efforts to alleviate a power crisis.
Chinese coal and other commodity prices fell in early trade, pulling oil down after rising earlier in the day. With coal and gas prices falling and technical indications like the relative strength index (RSI) still in overbought territory, the odds of a rapid but meaningful drop in oil prices are increasing. Late Tuesday, China’s National Development and Reform Commission said that coal prices would return to an acceptable range. Restrict any abnormalities that disrupt market order or harmful speculation on thermal coal futures. Brent crude futures fell 64 cents, or 0.8 per cent, to $84.44 a barrel, reversing a 75-cent gain the previous session but remaining close to multi-year highs.
WTI crude futures in the United States for November, which expire on Wednesday, lost 56 cents to $82.40 a barrel. The more active December WTI contract was down 59 cents, or 0.7 per cent, to $81.85 per barrel. Brent crude may drop to $82 per barrel and WTI to $78.50 per barrel while comfortably remaining in a strong bull market.
A global coal and gas shortage support oil markets, in general. This has resulted in a shift to diesel and fuel oil for power generation.
According to market sources, the market was further pulled down on Wednesday by data from the American Petroleum Institute industry group. It showed that U.S. oil stockpiles grew by 3.3 million barrels for the week ending Oct. 15. Nine analysts polled by Reuters projected a 1.9 million barrel increase in crude stocks.
However, gasoline and distillate stockpiles in the United States, including diesel, heating oil, and jet fuel, decreased far more than projected, indicating robust demand.
Gold was higher in Asia on Wednesday morning, with a weaker dollar offsetting an increase in U.S. bond yields. Concerns continue that interest rate hikes may occur sooner than predicted. Gold futures rose 0.22 per cent to $1774.35 per ounce. The yellow metal rose as much as 1.2 per cent on Tuesday before being forced to give up the majority of its gains due to a spike in U.S. Treasury yields. On Wednesday, benchmark 10-year Treasury rates reached their highest level since May 20, 2021. However, rising rates were countered by a falling dollar, which fell slightly on Wednesday.