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NEW YORK, Jan 18 (Reuters) – Oil prices fell about 1% on Wednesday, surrendering early gains as worries about a possible U.S. recession outweighed optimism that China’s lifting of COVID-19 curbs will fuel demand for crude in the world’s top oil importer.
The session high for both benchmarks was the highest since Dec. 5. For WTI, Wednesday was the first time in nine sessions that the contract settled down.
Oil prices reversed gains early in the afternoon along with Wall Street’s main indexes (.DJI), (.SPX), (.IXIC) as hawkish comments from U.S. Federal Reserve (Fed) officials sparked worries the central bank may not pause interest rate hikes any time soon.
Markets at first reacted positively to U.S. data, which showed retail sales and manufacturing production declined more than forecast in December, on hopes the Fed would now ease up on interest rate hikes.
“Coming on the back of the weakness in retail sales, the steep drop in industrial production and news of more job lay-offs adds to fears the U.S. could already be in recession,” analysts at ING, a bank, told customers in a note.
Supporting oil prices early in the session, China reported economic data that beat forecasts after the country started rolling back its zero-COVID policy in early December.
China’s lifting of restrictions should boost global oil demand to a record high this year, according to the International Energy Agency (IEA), while price cap sanctions on Russia could dent supply.
Rystad Energy, a consultancy, said the effect of sanctions on Russian crude exports after 1.5 months of the European Union embargo and G7 price cap has not been as devastating as some predicted.
Rystad said the losses were at about 500,000 barrels per day and that India and China remain key buyers of Russian crude.
Analysts expect a drawdown in U.S. crude stocks of about 600,000 barrels last week, a Reuters poll showed, which could provide some price support. ,
The American Petroleum Institute (API) was set to release industry data at 4:30 p.m. EST (2130 GMT). The U.S. government reports at 11 a.m. on Thursday. Both weekly reports were delayed a day due to Monday’s Martin Luther King Day federal holiday.
Additional reporting by Rowena Edwards and Julia Payne in London, Yuka Obayashi in Tokyo and Trixie Yap in Singapore; Editing by Marguerita Choy, Kirsten Donovan and David Gregorio
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