Oil fell for the first time in eight sessions as traders took stock of the outlook for worldwide demand, with China’s reopening delivering a lift while other parts of the global economy slow.
West Texas Intermediate fell toward $79 a barrel after rallying more than 8 per cent last week. China ditched Covid-19 curbs in late 2022 after years of strict lockdowns. That’s set to improve economic activity and mobility, with analysts forecasting oil demand in the top crude importer will likely hit a record.
Crude has had a bumpy start to the year, collapsing in the opening week before rebounding. In addition to China’s swift pivot, support for crude prices in recent sessions has come from growing expectations that the Federal Reserve is now nearing an end to rate hikes, and a weakening dollar. Traders are also tracking the impact of sanctions on Russian oil and product flows.
The drop in oil is “probably a temporary pause after a strong rally last week,” said Giovanni Staunovo, an analyst at UBS. Market outlooks this week from the Organization of Petroleum Exporting Countries as well as the International Energy Agency “have the potential to support prices on stronger Chinese demand,” he said.
- WTI for February delivery eased 0.4 per cent to $79.52 a barrel on the New York Mercantile Exchange at 9:42 a.m. in London.
- Brent for March settlement was 0.5 per cent lower at $84.84 a barrel on the ICE Futures Europe exchange.
The cartel turns in its analysis on Tuesday, with the IEA’s the next day. Extra commentary may come from the World Economic Forum in Davos. Trading activity maybe lower than usual on Monday, with some US-based investors away during a federal US holiday.
Time spreads show a mixed picture. Brent’s prompt spread — the difference between its two nearest contracts — is in contango, a bearish pattern that indicates ample near-term supply. Still, the three-month differential for the global benchmark is in the opposite, backwardated structure.
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