Crude is limping into the end of the year, with the US benchmark heading for the first back-to-back quarterly drop since mid-2019 as central banks tighten monetary policy. Concerns about the global growth outlook, alongside a soft physical market and falling liquidity have weighed on prices, despite China’s easing of Covid-19 restrictions.
The latest leg down comes at a complex moment, with traders assessing the fall-out from Group of Seven curbs on Russian oil, including a price cap that’s meant to punish Moscow for the war in Ukraine.
“The geopolitical risk premium has all but disappeared, but inflation concerns have not,” PVM Oil Associates analysts Tamas Varga and Stephen Brennock said in a report. “Clearly, investors are not worried the least about any potential supply shortage that might be the result of the price cap and the EU ban on Russian oil sales implemented two days ago.”
In response to the cap, which has been set at $60 a barrel, Russia is considering setting a price floor for its international oil sales. Moscow may either impose a fixed price for the nation’s barrels, or stipulate maximum discounts to international benchmarks at which they can be sold.
- WTI for January delivery shed 1% to $73.54 a barrel at 10:38 a.m. in London.
- Brent for February settlement lost 0.9% at $78.66 a barrel.
China eased a range of Covid restrictions on Wednesday, including allowing some home quarantine and scrapping certain test requirements. The world’s top crude importer was also said to be shifting focus to the economy, with a growth target of about 5% under consideration.
The American Petroleum Institute, meanwhile, reported that US stockpiles decreased by more than 6 million barrels last week, according to people familiar with the figures. Official inventories data follow later Wednesday.