Oil futures were steady after a volatile run as investors juggled a clouded supply outlook and concerns over weaker demand in virus-hit China.
West Texas Intermediate traded little changed around $80 a barrel after swinging in a $5 arc in the week’s opening session. Prices had plunged following a report that OPEC+ was considering an output increase, but then recovered to end little changed after Saudi Arabia pushed back against the suggestion. Kuwait also rejected the notion that the group is planning a production hike.
Crude-consumption trends in China remain in the spotlight as repeated Covid-19 outbreaks prompt officials to press on with lockdowns and movement curbs. That’s hurting the outlook for demand just weeks after investors had speculated Beijing may be moving away from its zero-tolerance stance.
Oil prices have weakened this month on concerns about demand, and as investors count down to the imposition of fresh European Union sanctions on Russian seaborne flows and a complementary Group of Seven price-cap plan. China’s crude buyers have paused some Russian oil purchases ahead of the price cap, while the uncertainty across the oil market continues to weigh on liquidity, with open interest for WTI the lowest since 2014.
Recent volatility “left both buyers and sellers hurting, potentially worsening an already troubled market that is suffering from falling volumes and lower open interest,” said Ole Hansen, head of commodities strategy at Saxo Bank. “Demand concerns, however, broadly remain with rising virus cases in China.”
- WTI for January delivery was little changed at $80.09 a barrel at 10:14 a.m. in London.
- Brent for January settlement was also little changed at $87.42 a barrel.
High shipping costs have also started to weigh on the market for actual oil barrels in recent weeks. On Monday, the industry’s benchmark route broke $100,000 a day, adding to the pressure on physical crude markets against a backdrop of weak Chinese buying.
© 2022 Bloomberg L.P.