Market Analytics and Technical Considerations
Key Points
Oil prospects fell more than $2 a barrel on Monday, with WTI hitting a 11-month low, as fights in top merchant China over severe Coronavirus checks fueled request concerns.
At 0230 GMT, Brent crude traded at $81.47 a barrel, down $2.16, or 2.6%, from $81.16 earlier in the session, its lowest level since Jan. 11.
West Texas Intermediate (WTI) crude fell $2.08, or 2.7%, to $74.20 per barrel in the United States. It dropped as low as $73.82 earlier, which was its lowest level since December 27, 2021.
After reaching 10-month lows last week, both benchmarks have experienced three weekly declines in a row. WTI fell 4.7% and Brent was down 4.6% at the end of the most recent week.
WTI’s trading range is expected to fall to $70-$75, he said, adding that the market could remain volatile depending on the outcome of the OPEC+ meeting and the price cap on Russian oil. In addition, growing concerns about weaker fuel demand in China due to a surge in COVID-19 cases prompted selling. Political uncertainty was caused by rare protests in Shanghai over the government’s stringent COVID restrictions.
Despite the fact that most of the world has lifted most restrictions, China, the world’s largest oil importer, has continued to follow President Xi Jinping’s zero-COVID policy.
As protests over China’s strict COVID restrictions erupted for a third day and spread to several cities following a fatal fire in the country’s far west, hundreds of demonstrators and police clashed in Shanghai on Sunday night.
As a result of growing dissatisfaction with Xi’s “zero-COVID policy,” nearly three years into the pandemic, a wave of civil disobedience has occurred in mainland China for the first time since he took office a decade ago.
Unless OPEC+ agrees on a further reduction of production quotas or the United States moves to reload its strategic petroleum reserves, oil prices may be heading further down. Concerns about demand in China and the absence of clear signs from oil producers to further cut output are driving bearish sentiment in the oil market.
On December 4, the Organization of the Petroleum Exporting Countries and Allies (OPEC+) will meet.OPEC+ agreed in October to reduce its production target by 2 million barrels per day until 2023.
Saadoun Mohsen, a senior official at Iraq’s state oil marketer SOMO, was quoted as saying on Saturday that the next OPEC+ meeting will take into account the market’s condition and balance.
Additionally, Western plans for a price cap on Russian oil were the focus of investors.
Diplomats from the Group of Seven (G7) and the European Union have been talking about setting a price limit on Russian oil that would be between $65 and $70 a barrel. This would limit the amount of money Moscow can use to pay for its military offensive in Ukraine without disrupting the global oil market.
However, according to EU diplomats, a meeting of government representatives from the European Union that was scheduled for Nov. 25 evening to discuss the issue was canceled.EU governments were divided on how high to limit Russian oil prices on Thursday. When an EU ban on Russian crude begins on December 5, the price cap is set to go into effect.
