Oil tumbled to the lowest level since December as a wave of unrest in China punished risk assets and clouded the outlook for energy demand, adding to the stresses in an already-volatile global crude market.
WTI for January delivery shed as much as 3.5 per cent to $73.60/bbl on the New York Mercantile Exchange, before trading at $74.96 at 9:38 a.m. in London.
Brent for January settlement was 3.1 per cent lower at $81.02/bbl.
Protests over harsh anti-virus curbs erupted across the world’s largest crude importer over the weekend, including demonstrations in Beijing and Shanghai, spurring a broad sell-off in commodities as the week opened. The rare show of defiance is raising the threat of a government crackdown.
The unrest comes after a sharp pullback in the oil market as the risk of a slowdown in China looms and the European Union floated a price cap on Russian crude that looks set to have minimal impact on trade. Speculators have been forced to markedly reduce bullish bets, posting the sixth-largest reduction in net-long positions on record for Brent last week.
More volatility is likely on the cards for oil in the coming days. OPEC+ will meet Sunday to decide on its next output level, while EU nations continue to negotiate plans for the price cap on Russian oil. The OPEC+ meeting will take place after the nearest portion of the Brent and WTI futures curves flipped into contango — a bearish structure indicating oversupply — with physical markets also under pressure.
“The current sentiment is anything but upbeat,” said Tamas Varga, an analyst at brokerage PVM Oil Associates Ltd. “It is not only confirmed by the weekly fall in outright futures prices but also by the contango that made a re-appearance both in WTI and Brent last week.”
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