Oil eases as investors eye US oil release, China demand concerns
Brent and WTI prices are set to climb for a fourth week in a row, supported by supply concerns in Libya and Kazakhstan and a drop in US crude inventories to 2018 lows. Some investors are also optimistic that Omicron's impact on the global economy and oil demand will be short-lived
Oil prices eased for a second session on Friday on growing concerns that Washington may soon act to cool prices, while movement controls in China to rein in a Covid-19 outbreak weighed on fuel demand.
Brent crude futures fell 30 cents, or 0.4%, to $84.17 a barrel at 0150 GMT. US West Texas Intermediate crude was down 45 cents, or 0.6%, at $81.67 a barrel.
China, the No 2 oil consumer globally, has suspended some international flights and stepped up efforts to rein in a virus outbreak at Tianjin while the highly transmissible Omicron variant has spread to the northeastern city of Dalian.
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Many cities, including Beijing, have also urged people to stay put during the Lunar New Year holiday, which could cool demand for transport fuel during a peak travel season.
"Market is a bit toppish," said Avtar Sandu, a commodities manager at Phillip Futures in Singapore, adding that reports on the Covid-19 situation in China and the sale of strategic petroleum reserves (SPR) in the United States were a concern.
The US Energy Department said on Thursday it had sold 18 million barrels of strategic crude oil reserves to six companies, including Exxon Mobil (XOM.N) and a unit of refiner Valero Energy Corp (VLO.N).
Nevertheless, Brent and WTI prices are set to climb for a fourth week in a row, supported by supply concerns in Libya and Kazakhstan and a drop in US crude inventories to 2018 lows. Some investors are also optimistic that Omicron's impact on the global economy and oil demand will be short-lived.
Several banks have forecast oil prices to hit $100 a barrel later this year as demand is expected to outstrip supply.
"The short-term outlook still has many risks, but optimism is high that it will be short-lived," OANDA's analyst Edward Moya said in a note.
However, with oil prices above $80 a barrel, there is growing political pressure for the White House to lobby OPEC+ to hit their production quotas, he said.
"Biden may resort to another SPR release and while that won't solve any problems, it could send WTI crude down to the $80 level," Moya said.
