Oil: oil drops on Chinese intervention to alleviate coal crisis

MELBOURNE: Oil prices fell after Chinese government signaled it was looking for ways to bring record high coal prices under control and ensure coal mines are operating at full capacity as Beijing prepares to ease a shortage of electricity.

The prices of Chinese coal and other raw materials collapsed at the start of trade, which caused

prices have fallen from a slight increase earlier today.

Oil markets hit multi-year highs earlier in the week following a global coal and gas crisis, which prompted a switch to diesel and fuel oil for power generation.

“Ultimately, China’s coal production must increase to address its energy problems,” Commonwealth Bank commodities analyst Vivek Dhar said in a note.

US West Texas Intermediate (WTI) crude futures fell 30 cents, or 0.4%, to $ 82.66 a barrel at 3:16 a.m. GMT, reversing most of a 52-cent gain from see you on Tuesday.

Brent crude futures fell 43 cents, or 0.5%, to $ 84.65 a barrel, matching a rise of 75 cents in the previous session.

The China Electricity Council said Tuesday evening that the Chinese National Development and Reform Commission (NDRC) discussed government intervention in coal prices at a meeting of major coal producers.

In a separate statement, the NDRC said it would ensure coal mines are operating at full capacity and aim to produce at least 12 million tonnes per day, which would represent an increase of more than 1.6 million. tonnes compared to the end of September.

The market was also put under pressure by data from the industry group American Petroleum Institute which showed US crude inventories rose 3.3 million barrels for the week ended Oct. 15, according to market sources.

That was well above nine analysts’ forecasts for a 1.9 million barrel increase in crude inventories, in a Reuters poll.

However, US stocks of gasoline and distillates, which include diesel, heating oil and jet fuel, fell much more than analysts expected, indicating strong demand.

Gasoline inventories were down 3.5 million barrels from analysts’ forecasts of a drop of about 1.3 million barrels, while distillate inventories were down 3 million barrels from 700,000 barrels drop forecast.

Data from the US Energy Information Administration is due Wednesday.

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