Oil dipped as investors shifted their focus back to concerns over the demand outlook after geopolitical tensions eased.
West Texas Intermediate slid near $85 a barrel after closing 1.5 per cent lower on Wednesday. China is grappling with rising Covid cases, while JPMorgan Chase & Co. projected the US will enter a “mild” recession next year due to interest-rate hikes. A stronger dollar added to bearish headwinds.
Despite a barrage of geopolitical headlines this week, from a missile landing in Poland to an attack on a tanker in the Middle East, oil remains largely rangebound. Prices have been largely wedged between $80 and $95 since August, and traders continue to await the full impact of sanctions on Russian oil and a potential global economic slowdown.
“Prices remain under downside pressure, with China still locking down entire regions to contain rising infection cases,” Citigroup analysts including Francesco Martoccia said in a report. “The China re-opening trade is de facto faded, although the government is still relaxing some of its most draconian measures.”
- WTI for December delivery fell 0.5 per cent to $85.14 a barrel at 10:35 a.m. in London.
- Brent for January settlement lost 0.3 per cent to $92.62 a barrel.
Oil traders are also having to grapple with surging rates to charter ships to haul oil across the globe. On Wednesday, benchmark earnings for supertankers that can haul 2 million barrels jumped above $96,000 a day. Ships on the US-to-China route now cost almost $15 million, the most since April 2020.
The strength in freight is weighing on the crude market’s structure, the Citigroup analysts said. Brent and WTI futures curves have weakened markedly over the last week, though remain in backwardation, indicating tight supplies.
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