Oil prices slipped on Tuesday as recession concerns and worsening COVID-19 outbreaks in top crude importer China heightened fears of lower fuel demand.

Brent crude was down 93 cents, or 1%, at $96.99 a barrel by 1129 GMT, while U.S. West Texas Intermediate (WTI) crude was $1.16, or 1.3%, lower at $90.63.

Both benchmarks hit their highest since August on Monday amid reports that leaders in China were weighing an exit from the country’s strict COVID-19 restrictions.

However, new coronavirus cases have surged in Guangzhou and other Chinese cities, dimming the outlook for fewer restrictions.

“It is worth recalling that China’s zero tolerance towards flare-ups of COVID infections was the main reason behind last month’s sizeable downward revision in the world’s oil demand (by the International Energy Agency),” said PVM analyst Tamas Varga.

Meanwhile, the ICE exchange, home to the Brent benchmark, has increased the initial margin rates for front-month Brent crude futures by 4.92%, making maintaining a futures position more expensive from the close of business on Tuesday.

Market participants will also be eyeing U.S. CPI data on Friday, given high inflation and rising interest rates highlight the possibility of a global economic recession.

U.S. crude oil stocks were expected to have risen by about 1.1 million barrels last week, a preliminary Reuters poll showed on Monday.

The poll was conducted ahead of reports from the American Petroleum Institute due at 2130 GMT on Tuesday and the Energy Information Administration at 1530 GMT on Wednesday.

On the supply side, bullish signals remain in the near term.

The European Union ban on Russian oil, imposed in retaliation for Russia’s invasion of Ukraine, is set to start on Dec. 5 and will be followed by a halt on oil product imports in February. Moscow calls its actions in Ukraine “a special operation”.

By Reuters, November 16, 2022