Oil prices fell on Wednesday, as the Chinese government sought to curb the rise in record coal prices.
Beijing is seeking to operate its coal mines at full capacity to cope with the escalating electricity shortage crisis.
Prices of Chinese coal and other commodities fell in early trading on Wednesday, which in turn led to lower oil prices.
Oil Prices Today
By 08:23 AM GMT (11:23 AM Mecca Time), Brent crude futures prices – for December delivery – fell by 0.87%, recording $84.34 a barrel, but it is still close to its highest levels in several years.
The prices of West Texas Intermediate crude futures – November delivery – also fell by 0.84%, to the level of $ 82.26 a barrel.
“With coal and gas prices declining, and RSI technical indicators still in overbought territory, the potential for a sharp, but substantial, drop in oil prices increases,” said Jeffrey Haley, chief market analyst at OANDA.
China’s National Development and Reform Commission said late Tuesday that it will restore coal prices to a reasonable level and crack down on any irregularities disturbing market order or malicious speculation on thermal coal futures.
The Onda analyst indicated that Brent crude could fall to $82 and WTI to $78.50 a barrel.
“It will still be comfortable in a strong bull market,” he said. “Even if oil were to go down $5, I still think the drop would be short-lived.”
Oil markets in general remain supported on the back of the global coal and gas crisis, which has led to a shift to diesel and fuel oil for electricity generation.
US Oil Stock
Oil markets came under pressure on Wednesday, due to data from the American Petroleum Institute that showed US crude inventories rose by 3.3 million barrels in the week ending October 15.
The rise came well above the expectations of 9 analysts for an increase of 1.9 million barrels in crude stocks, in a Reuters poll.
However, US gasoline and distillate inventories, which include diesel, heating oil and jet fuel, fell much more than analysts had expected, indicating strong demand.
Data from the US Energy Information Administration is due later Wednesday.