Oil slips as strong dollar, COVID-19 in China fuel demand worries

By Ebru Sengul Cevrioglu

ANKARA (AA) - Oil prices decreased on Tuesday over weak demand signals fueled by slowing economic activity in China due to rising COVID-19 cases.

International benchmark Brent crude traded at $95.19 per barrel at 10.06 a.m. local time (0706 GMT) for a 1.03% drop from the closing price of $96.19 a barrel in the previous trading session.

American benchmark West Texas Intermediate (WTI), trading at $90.08 per barrel at the same time, decreased 1.15% after the previous session closed at $91.13 a barrel.

Prices came under pressure with demand jitters as the US dollar index, which pits the dollar against a basket of six global currencies, rose. When the dollar gains in value against other currencies, dollar-denominated oil becomes more expensive for buyers, discouraging trade.

The "most difficult" resurgence of COVID-19 cases in Xinjiang has forced authorities to close travel out of the region as China proceeds to host the country’s biggest political summit this month.

Meanwhile, Fitch Ratings said Monday that the decision by the Organization of Petroleum Exporting Countries (OPEC) and allies, known as OPEC+, to cut oil production by 2 million barrels per day (bpd) starting in November will have a muted impact on global oil market since the actual output cuts will be smaller.

"The recent increases in global oil inventories suggest that the market is in a production surplus," the global rating agency said in a report.

However, EU's adoption of new sanctions package against Russia last week limits price losses, fueling supply concerns. The eighth sanctions package against Russia includes a prohibition of transporting oil to non-EU countries above a certain price.