Oil Drifts Lower as Swelling China Covid Cases Dampen Sentiment

As risks to China’s demand grow, the Middle Eastern Dubai benchmark has come under pressure. Brent was heading for its biggest closing premium versus Dubai since June on Tuesday.

Brent has flirted with a run at $100 a barrel this week, spurred by last week’s optimism that China would ease its Covid Zero strategy, along with a weakening US dollar. Goldman Sachs said that the risks to oil prices remain on the bullish side, with global inventories depleted and spare capacity limited.

“Focus has slowly but surely shifted a bit toward demand, with China talking about exiting the Covid strategy once more,” said Hans van Cleef, senior energy economist at ABN Amro. It is “difficult to break higher as recession risks still cap the upside potential while, at the same time, the risk of lower supply is providing some support.”

PRICES:

• WTI for December delivery fell 1.3% to $90.63 a barrel at 10:34 a.m. in London
• Brent for January settlement was 1% lower at $96.93 a barrel