Economy

Oil down on buildup of US crude stocks, China's effort to ease coal crunch

Oil becomes more desirable for power ahead of winter heating season, triggering demand concerns and outstripping supply

Firdevs Yuksel   | 20.10.2021
Oil down on buildup of US crude stocks, China's effort to ease coal crunch

ISTANBUL

Oil prices dropped on Wednesday over an increase in US crude oil inventories and China's planned intervention to curb record-high coal prices.

International benchmark Brent crude was trading at $84.21 per barrel at 07.54GMT, down 1.02% after closing Tuesday at $85.08 a barrel.

American benchmark West Texas Intermediate (WTI) traded at $81.61 a barrel at the same time for a 1.01% fall after ending the previous session at $82.44 per barrel.

According to the American Petroleum Institute (API), US oil stocks are forecast to rise by about 3.3 million barrels, well above the market expectation of a 2.2 million-barrel build. The increase indicates that supply is recovering and demand is falling in the world’s largest oil-producing and -consuming country.

Investors are now awaiting inventory data from the Energy Information Administration due later on Wednesday.

Moreover, news of the Chinese government's intention to intervene to curb record-high coal prices, as well as ensure coal mines operate at full capacity to ease power shortages, also put pressure on oil prices.

In China, which generates a substantial share of its electricity production from coal, prices reached record highs due to rising demand and energy supply concerns ahead of winter.

Oil prices, in general, remain supported on the back of the global energy crunch, which is making oil a more desirable alternative for power generation before the winter heating season, triggering demand concerns and outstripping supply.

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