Oil prices came off their earlier gains on Wednesday after several banks cut their China growth forecasts for the year. Brent crude futures were down 0.2% at $74.62 per barrel while U.S. West Texas Intermediate (WTI) crude futures were down 0.3% at $72.45 per barrel.
The downward revisions in China's growth forecast are the result of the latest COVID-19 outbreak in the country. Although the National Health Commission (NHC) had earlier reported that the outbreak was under control fresh cases continue to emerge leading to curbs on transportation and other economic activities in affected areas. These include the northeastern province of Liaoning where infections have been reported among cargo handlers and truck drivers at the key port city of Dalian.
Aside from the COVID-19 situation the Organization of the Petroleum Exporting Countries and its allies together known as OPEC+ are expected to increase oil production levels in the coming months as the global demand for oil continues to recover.
Despite some concerns over the Delta variant of COVID-19 which has caused several countries to reimpose travel restrictions the demand for crude oil has been steadily increasing. This is in part due to the vaccination programs that have rolled out across the world with more and more countries achieving higher levels of immunity against the virus.
However the recent cuts in China's growth forecasts have caused analysts to re-evaluate their projections for the global oil market. In a note to clients Goldman Sachs said that it now expects China's oil demand growth to slow down significantly in the coming months due to the resurgence of COVID-19 cases.
Other factors affecting the oil market include the ongoing tensions between the United States and Iran as well as the political instability in several oil-producing countries such as Venezuela Libya and Nigeria.
