Picture: BLOOMBERG/ANDREY RUDAKOV
Picture: BLOOMBERG/ANDREY RUDAKOV

Melbourne — Oil prices fell after the Chinese government flagged it was looking for ways to tame record high coal prices and that it would ensure coal mines operate at full capacity as Beijing moved to ease a power shortage.

Chinese coal prices and other commodity prices slumped in early trade, which pulled oil prices down from an uptick earlier in the day.

Oil markets had hit multiyear highs earlier in the week due to a global coal and gas crunch, which has driven a switch to diesel and fuel oil for power generation.

“Ultimately, China’s coal output needs to increase to remedy its energy woes,” Commonwealth Bank commodities analyst Vivek Dhar said in a note.

US West Texas Intermediate (WTI) crude futures fell 30c, or 0.4%, to $82.66 a barrel at 3.16am GMT, reversing most of a 52c gain from Tuesday.

Brent crude futures dropped 43c, or 0.5%, to $84.65 a barrel, paring a 75c rise in the previous session.

The China Electricity Council said late on Tuesday China’s National Development and Reform Commission (NDRC) discussed government intervention in coal prices at a meeting of key coal producers.

In a separate statement, the NDRC said it would ensure coal mines operate at full capacity and aim to achieve at least 12-million tonnes a day of output, which would be up more than 1.6-million tonnes from late September.

The market was also pressured by data from the American Petroleum Institute industry group which showed US crude stocks rose by 3.3-million barrels for the week ended October 15, according to market sources.

That was well above nine analysts’ forecasts for a rise of 1.9-million barrels in crude stocks, in a Reuters poll.

However US petrol and distillate inventories, which include diesel, heating oil and jet fuel, fell much more than analysts had expected, pointing to strong demand.

Petrol stocks fell by 3.5-million barrels compared with analysts’ forecasts for a drop of about 1.3-million barrels, while distillate stocks fell by 3-million barrels, compared with forecasts for a drop of 700,000 barrels.

Data from the US Energy Information Administration is due on Wednesday.

Reuters

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