MELBOURNE – Oil prices turned down 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 in turn pulled oil prices down from an uptick earlier in the day.
Oil markets had hit multi-year highs earlier in the week on the back of 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 30 cents, or 0.4 percent, to $82.66 a barrel, reversing most of a 52-cent gain from Tuesday.
Brent crude futures dropped 43 cents, or 0.5 percent, to $84.65 a barrel, paring a 75-cent 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 tons per day of output, which would be up more than 1.6 million tons 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 Oct. 15, according to market sources.
Gasoline 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.
Meanwhile, tanker rates to ship liquefied natural gas (LNG) have more than doubled since the start of the month as a power crisis in Asia and Europe drives up demand for vessels, industry sources said on Tuesday.
The daily charter rate for a tri-fuel diesel-electric (TFDE) vessel that can carry 160,000 cubic meters of LNG to Pacific basin ports rose to $202,500 a day on Tuesday, the highest since Jan. 15, according to data from Spark Commodities.
For the same type of ship moving in the Atlantic Basin, the rate hit its highest since late-January on Friday, but dipped to $138,250 a day on Tuesday, Spark data showed.
Both rates have more than doubled since the start of the month.
As LNG plants return from maintenance and supply is expected to grow in the near-term to meet increased demand for heating during winter, availability of ships has been tight, the sources said. – Reuters
