Oil extends rangebound run as traders eye China, dollar outlooks

Oil switched between gains and losses, as the market remains caught between the outlook for global growth and China’s easing of Covid restrictions. 

West Texas Intermediate futures traded near $89 a barrel and have been in a range of just over $10 for the last month. The dollar rose for the first time in three sessions, making commodities priced in the currency more expensive, overshadowing expectations for a rebound in Chinese demand after the nation eased some of its strict Covid Zero restrictions.

An increase in Chinese crude consumption could lead to a further tightening of the market, which is facing European Union sanctions on Russian oil flows next month after the OPEC+ alliance initiated a round of supply cuts. US Treasury Secretary Janet Yellen said that without a price cap it is likely that Russia will have to shut in some of its oil production.

The European Union is “ready to go” with an effort to impose a price cap on Russian oil, according to the president of the group’s executive arm, but that a price level has not yet been decided. JPMorgan Chase & Co. analysts including Natasha Kaneva said Russia’s output is only likely to see a modest dip of between 200,000 and 500,000 barrels a day when sanctions come into effect. 

“We continue to be a range driven market,” said Keshav Lohiya founder of consultant Oilytics. “Even the China Covid relaxation story failed to break oil to the upside.”

Prices

  • WTI for December delivery fell 0.5 per cent to $88.56 a barrel at 9:54 a.m. in London.
  • Brent for January settlement dropped to $95.70 a barrel.

© 2022 Bloomberg L.P.

Dear user, please be aware that we use cookies to help users navigate our website content and to help us understand how we can improve the user experience. If you have ideas for how we can improve our services, we’d love to hear from you. Click here to email us. By continuing to browse you agree to our use of cookies. Please see our Privacy & Cookie Usage Policy to learn more.