Oil prices steady as China Covid worries outweigh supply concerns

Oil prices were little changed on Wednesday as Covid-19 cases in China continued to climb, sparking worries of lower fuel demand in the world's top crude importer, and outweighing concerns about an escalation of geopolitical tensions and tighter oil supply.

Brent crude futures dropped by 6 cents, or 0.1 per cent, to $93.80 a barrel by 0148 GMT, while US West Texas Intermediate (WTI) crude futures fell 4 cents, or 0.1 per cent, to $86.88 a barrel.

Oil prices settled higher on Tuesday after oil supply to parts of Eastern and Central Europe via a section of the Druzhba pipeline was temporarily suspended, according to oil pipeline operators in Hungary and Slovakia.

This disruption came concurrent with an explosion in a village in eastern Poland near the Ukrainian border that killed two people, raising concerns that the Ukraine conflict could spill over its borders.

"Unconfirmed news about Russia’s missile attack on Poland has increased the risks of further sanctions on Russia by the US, EU and allies, which may worsen oil supply issues, putting upside pressure on the oil prices," CMC Markets analyst Tina Teng said.

Sanctions on Russian oil could lead to a 1.4 million barrels per day loss of supplies next year, the International Energy Agency said.

In China, rising Covid-19 cases are weighing on sentiment despite hopes of easing virus restrictions this the week.

That has dampened oil demand growth outlook with the International Energy Agency (IEA) forecast demand growth slowing to 1.6 million bpd in 2023 from 2.1 million bpd this year. Earlier, the Organization of the Petroleum Exporting Countries (OPEC) cut its forecast for 2022 global oil demand growth for a fifth time since April citing mounting economic challenges.

Industry data showing a bigger-than-expected drop in US crude stockpiles provided some support to oil prices.

US crude oil inventories fell by about 5.8 million barrels for the week ended November 11, according to market sources citing American Petroleum Institute figures.

By comparison, seven analysts polled by Reuters estimated on average that crude inventories dropped by about 400,000 barrels.

Official US inventory data from the Energy Information Administration is due at 10:30 a.m. EST (1530 GMT).

In the US, producer prices increased less than expected in October, suggesting that inflation was starting to ease, which may allow the Federal Reserve to slow its aggressive pace of interest rate hikes.