Oil prices slip on OPEC cut in demand forecast, China COVID cases

Oil prices extended losses in early Asian trade on Tuesday after OPEC cut its 2022 global demand forecast, while rising COVID-19 case numbers in China clouded the outlook for fuel consumption in the world's top crude importing nation.

Brent crude futures fell 39 cents, or 0.4%, to $92.75 a barrel by 0133 GMT after settling down 3% on Monday. U.S. West Texas Intermediate crude was at $85.31 a barrel, down 56 cents, or 0.7%, after tumbling 3.5% in the previous session.

The Organization of the Petroleum Exporting Countries (OPEC) cut its 2022 global oil demand growth forecast for a fifth time since April, citing mounting economic challenges including high inflation and rising interest rates.

This comes after the International Monetary Fund said on Sunday that the global economic outlook has become gloomier than projected last month, citing a steady worsening in purchasing manager surveys in recent months

Meanwhile, though investors cheered China's announcements last week that it would lessen the impact of a strict zero-COVID policy to spur economic activity and energy demand, ANZ analysts said surging case numbers continue to be a key downside risk.

"The market is currently defying looming supply risks, despite expectations that the latest demand downgrade could be supply-negative for OPEC oil output," the analysts said, referring to imminent European Union sanctions on Russian oil exports.

Elsewhere, oil output in the Permian Basin is set to hit another record of 5.499 million barrels per day (bpd) in December, the U.S. Energy Information Administration (EIA) said in its monthly productivity report on Monday.

However, aging shale regions are showing weaker per-well output, causing overall U.S. crude oil production in shale regions to rise by a mere 91,000 bpd to 9.191 million bpd in December, despite a surge in prices, the EIA said.