Oil prices hold steady after draw in US oil inventories and COVID surge were seen in China

Oil steadied after a three-day rally. Market watchers’ fears that short-term Chinese demand may decline amid a COVID-19 surge offset support from a draw in US oil inventories and a less strong dollar.

WTI settled up by 5% from Monday to Wednesday and is now trading around $79 a barrel. In China, the world's largest crude importer, major cities see the largest drop in traffic congestion since the beginning of the year, which was fueled by an abrupt exit from zero-COVID and a record number of COVID cases. 

According to data from the Energy Information Administration, US commercial inventories fell by 5.9 million barrels last week. At the same time, US oil reserves are at the lowest level for this season since 2014.

Oil is set to end this year slightly higher. Risks of recession in the US and Europe, the impact of G7’s oil price cap on Russian flows, the issue of oil supply cuts by OPEC and its allies will mainly drive oil prices.