After tumbling the previous session, oil fell precipitously on Wednesday, pressured by worries about weak demand caused by the state of the world economy and China’s rising COVID cases.
Brent futures had dropped $1.88 to $80.22 per barrel, a 2.3% loss. To reach $75.25 per barrel, U.S. crude fell $1.68, or 2.2%.
Tuesday saw a greater than 4% decline for both benchmarks, with Brent suffering its largest one-day loss in more than three months.
Additionally, in anticipation of weak domestic demand, the Chinese government increased export quotas for refined oil products in the first batch for 2023.
As worries about oversupply persisted, top oil exporter Saudi Arabia may further reduce the prices for its premium Arab Light crude grade to Asia in February.
The dollar lost ground on Wednesday after significant gains in the previous session, which helped support oil. Oil demand typically increases when the dollar declines because commodities priced in dollars are less expensive for holders of other currencies.
U.S. crude oil stockpiles were likely to increase by 2.2 million barrels, while distillate inventories were predicted to decrease.
The American Petroleum Institute, a trade organization, will soon publish information on U.S. crude inventories. The U.S. Department of Energy’s statistical division, the Energy Information Administration, will present its data.
Japanese Company Moves Closer to Acquiring Natural Gas
A deal for Japanese company Tokyo Gas to buy American natural gas producer Rockcliff Energy is about to be finalized.
The deal’s value, which would include the assumption of debt, is estimated to be around $4.6 billion. The actual purchaser would be T.G. Natural Resources, a Texas-based subsidiary of the Japanese company.
Rockcliff Energy produces about 1 billion cubic feet daily in the Haynesville shale play. Quantum Energy Partners is the current owner.
The Haynesville play is also a focus of T.G. Natural Resources, which produces about 330 million cubic feet daily.
Japan is attempting to diversify its sources of gas and oil to lessen its reliance on Russia, much like Europe. To advance these diversification strategies, Japanese energy companies signed several agreements for LNG shipments from the United States and Oman last year.
Even so, Japan continues to depend on oil and gas from Sakhalin, which is why the G7 member was given a waiver from the price cap the group decided on as a way to cut Russia’s oil revenues.
Japan has changed its mind about nuclear power and diversifying its fossil fuel supply. A panel of experts appointed by the Japanese Ministry of Industry decided that Japan would allow the development of nuclear reactors and allow existing reactors to continue operating past the current 60-year limit. Before the Fukushima disaster in 2011, Japanese leaders had a pro-nuclear stance, but the energy crisis has started to change.