Oil has weakened this month, erasing all of the year’s once-substantial gains, as central banks tighten monetary policy and the macroeconomic outlook sours. The pace of the selloff in recent weeks means that the global Brent benchmark is now oversold, one sign that the market rout could be nearing an end.
“Short-term technical traders are in control as the overall level of participation continues to fall ahead of year-end,” said Ole Hansen, head of commodities strategy at Saxo Bank A/S. “It has been a very difficult year across markets and an early closing of books seems to be unfolding.”
Until about a week ago, Chinese officials were still pledging to eliminate Covid-19 from the world’s largest crude-importing nation. But protests against the stringent rules seem to have hastened Beijing’s pivot away from a policy that’s been closely tied to President Xi Jinping.
- WTI for January delivery gained 0.8% to $72.56 a barrel at 10:31 a.m. London time
- Futures sank to the lowest this year on Wednesday
- Brent for February settlement rose 0.5% to $77.52 a barrel
Though sanctions on Russian crude have so far had little impact on the market, there’s a growing backlog of oil tankers near the Turkish Straits after an insurance wrangle prevented some vessels from passing through the country’s waters. The blockage has prompted talks between the US and Turkey in a bid to resolve the problem.
Meanwhile, Amos Hochstein, the US State Department’s senior energy security adviser, said Wednesday that Joe Biden’s administration is still weighing the impact of China’s reopening — and the price cap on Russian supplies — before moving to start replenishing the depleted Strategic Petroleum Reserve.