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Oil switched between gains and losses, as the market remains caught between the outlook for global growth and China’s easing of COVID restrictions.
West Texas Intermediate futures traded near US$89 a barrel and have been in a range of just over US$10 for the last month. The dollar rose for the first time in three sessions, making commodities priced in the currency more expensive, overshadowing expectations for a rebound in Chinese demand after the nation eased some of its strict COVID Zero restrictions.
An increase in Chinese crude consumption could lead to a further tightening of the market, which is facing European Union sanctions on Russian oil flows next month after the OPEC+ alliance initiated a round of supply cuts. U.S. Treasury Secretary Janet Yellen said that without a price cap it is likely that Russia will have to shut in some of its oil production.
The European Union is “ready to go” with an effort to impose a price cap on Russian oil, according to the president of the group’s executive arm, but that a price level has not yet been decided. JPMorgan Chase & Co. analysts including Natasha Kaneva said Russia’s output is only likely to see a modest dip of between 200,000 and 500,000 barrels a day when sanctions come into effect.
“We continue to be a range driven market,” said Keshav Lohiya founder of consultant Oilytics. “Even the China COVID relaxation story failed to break oil to the upside.”
