A 3D printed oil pump jack is seen in front of displayed OPEC logo in this illustration picture, April 14, 2020. File Photo / Reuters
New York: Oil tumbled to its lowest price in almost a year as a wave of unrest in China punished risk assets and clouded the outlook for energy demand, compounding the stresses in an already volatile crude market.
West Texas Intermediate traded near $76 after earlier falling below $74 a barrel on Monday. Protests over harsh anti-Covid measures erupted across the world’s largest crude importer over the weekend, spurring a broad selloff in commodities as the week opened. The rare shows of popular defiance raise the threat of a government crackdown.
The oil market has looked increasingly shaky in recent days. The nearest portion of the Brent and WTI futures curves flipped into contango -- a bearish structure indicating oversupply -- with physical markets also under pressure. Speculators markedly reduced bullish bets, posting the sixth-largest reduction in net-long positions on record for Brent last week.
JPMorgan Chase & Co. cut its outlook for next year, analysts including Natasha Kaneva wrote in a report. The bank reduced its Brent crude forecast by $8 to $90 as it expects Russian production to hit prewar levels by mid-2023.
More volatility is likely coming for oil in the coming days. OPEC+ will meet Sunday to decide on its next output level, while European Union nations negotiate plans for a price cap on Russian crude.
"The biggest story driving global oil prices in 2H’22 is not one to do with physical oil flow, but has simply been a story of financial liquidity, or the lack of it,” RBC Capital Markets analysts including Michael Tran and Helima Croft said in a note to clients. "We anticipate that markets will be thinly traded as risk allocators look to protect the book into year-end.”
Over the weekend, the US moved to grant supermajor Chevron Corp. a license to resume oil production in Venezuela after sanctions halted all drilling activities almost three years ago. The sanctions relief comes after Norwegian mediators announced the restart of political talks between President Nicolas Maduro and the opposition. Yet Chevron’s CEO said it might take years to begin to refurbish those oil fields, meaning additional output won’t be immediate.
