Oil wiped out early gains as fears over an economic slowdown continue to weigh on the outlook for demand.
West Texas Intermediate futures flipped between gains and losses near $85 a barrel after earlier adding as much as 1.5%. In a speech on Sunday opening the 20th Communist Party congress, Chinese President Xi Jinping signaled no change in direction for China’s strict Covid Zero policy, a strategy that has dragged on its economy this year.
Key oil market indicators in Asia are pointing to weakness as traders watch China’s buying activity for clues about demand in the world’s largest crude importer.
Sluggish growth in China has added to a raft of bearish factors for oil, including aggressive monetary policy by central banks to try and tame inflation and a stronger US dollar. That’s overshadowed oil production cuts from the OPEC+ alliance that take effect from November.
“The focus had shifted toward the demand side after the OPEC+ meeting,” said Hans van Cleef, senior energy economist at ABN Amro. The market is “waiting for the next trigger to provide some direction.”
The International Energy Agency last week warned that the output curbs could tip the global economy into recession, while the US criticized the cuts. White House National Security Adviser Jake Sullivan said options for re-evaluating US-Saudi relations include “changes to our approach to security assistance.” He spoke Sunday on CNN’s State of the Union.
“Broadly, the path of least resistance remains downward, under continuing pressure from economic and oil demand concerns,” said Vandana Hari, the founder of Vanda Insights.
- WTI for November delivery fell 0.3 per cent to $85.21 a barrel at 10:26 a.m. in London.
- Futures fell almost 8 per cent last week.
- Brent for December settlement shed 0.1 per cent to $91.51 a barrel.
Trading houses and refiners are racing to book storage tanks in Rotterdam in the coming months on expectations of a supply crunch after the EU sanctions on Russia take effect, according to a storage official at Koninklijke Vopak NV. The storage company has seen heightened inquiries about using its tanks to bring in Russia’s Urals grade into the northwest Europe refining hub up to the Dec. 5 cutoff, the official said.
© 2022 Bloomberg L.P.