Oil falls as China considers intervention to ease coal crisis

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LONDON – Oil prices fell on Wednesday after the Chinese government stepped up its efforts to curb record high coal prices and ensure that coal mines operate at full capacity as Beijing moved to ease energy shortages.

Brent crude futures fell 73 cents, or 0.9%, to $ 84.35 a barrel at 1003 GMT, down from a 75-cent gain in the previous session, but still hovering near multi-year highs.

US West Texas Intermediate (WTI) crude futures for November, due Wednesday, fell 68 cents, or 0.8%, to $ 82.28 a barrel. The most active WTI contract for December was down 80 cents, or 1%, to $ 81.64 a barrel.

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“China is planning to take measures to combat the sharp increases in the domestic coal market … which could put considerable pressure on the price of coal there and reverse the shift from fuel to oil,” Commerzbank said.

Prices for Chinese coal and other commodities slumped in early trading, which in turn pushed oil down from a rally earlier in the day.

China’s National Development and Reform Commission said on Tuesday it would return coal prices to a reasonable range and crack down on any irregularities that disrupt market order or malicious speculation on thermal coal futures.

Oil markets in general continue to be supported by the global coal and gas crisis, which has prompted a switch to diesel and fuel oil for power generation.

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But Wednesday’s market was also pressured by data from the American Petroleum Institute industry group, which showed US crude stocks rose by 3.3 million barrels during the week ending in October. 15, according to market sources.

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

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

Data from the US Energy Information Administration will be received later on Wednesday. (Additional reporting from Sonali Paul in Melbourne and Koustav Samanta in Singapore; edited by David Evans)

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