Oil Falls Below $92 Per Barrel On Renewed Demand Worries

Oil prices fell on Wednesday as COVID-19 curbs in top crude importer China and expectations of further interest rate hikes fanned concerns of a global economic recession and lower fuel demand growth.

Brent crude futures fell $1.12, or 1.2 per cent, to $91.71 a barrel after slipping 3 per cent in the previous session. US West Texas Intermediate crude futures declined by $1.25, or 1.4 per cent, to $85.63 a barrel.

Oil pared strong gains made on Monday after the Organization of the Petroleum Exporting Countries (OPEC) and their allies, a group known as OPEC+, decided to cut output by 100,000 barrels per day in October.

"Fading the OPEC+ production cut bounce wasn't that hard to do given a laundry list of global economic challenges," said Edward Moya, a senior market analyst at OANDA, in a note.

"Despite some better-than-expected US services data, global growth isn't looking good at all and that is trouble for crude prices."

China's stringent zero-COVID policy has kept cities such as Chengdu, with 21.2 million people, under lockdown, curbing people movement and oil demand at the world's second-largest consumer.

"More infectious strains of the virus are raising concerns that authorities will be forced to more frequently lockdown areas as China persists with a zero-COVID strategy," said ANZ Research analysts in a note.

Investors are also watching for further interest rate hikes to curb inflation. The European Central Bank is widely expected to lift rates sharply when it meets on Thursday. After the ECB's meeting, a US Federal Reserve meeting will follow on September 21.

A stronger US dollar, which was up about 0.5 per cent on more positive US services industry data, also pressured oil prices. Oil is priced in US dollars, so a stronger greenback makes the commodity more expensive to holders of other currencies.

Lending some support to prices, however, were expectations of tighter oil inventories in the United States.

US crude stockpiles are expected to have fallen for a fourth consecutive week, declining by an estimated 733,000 barrels in the week to September 2, a preliminary Reuters poll showed on Tuesday.

Crude inventories in the US Strategic Petroleum Reserve (SPR) fell 7.5 million barrels in the week to September 2 to 442.5 million barrels, their lowest since November 1984, according to data from the Department of Energy.

Weekly US inventory reports from the American Petroleum Institute and Energy Information Administration will be released on Wednesday and Thursday respectively, a day later than usual, because of a public holiday on Monday.