As part of the rout, the market structure of both oil benchmarks shifted in ways that reflect dwindling supply concerns. Crude had come close to record highs this year as Russia’s invasion of Ukraine added to those concerns.
China, which sources say is looking to slow crude imports from some exporters, has seen a rise in COVID-19 cases while hopes for less aggressive U.S. rate hikes have been dented by remarks from some Federal Reserve officials this week.
“As things stand, bullish price drivers are in short supply,” said Stephen Brennock of oil broker PVM. “Yet with the EU embargo on Russian crude less than three weeks away, oil prices could still end the year with a bang.”
Brent crude was down $3.17, or 3.5%, at $86.61 a barrel by 1445 GMT, having touched its lowest since Sept. 28 at $85.80. U.S. West Texas Intermediate (WTI) crude was down $3.67, or 4.5%, at $77.97.
Both benchmarks are heading for a second weekly loss, with Brent on track for a more than 9% decline.
In a sign of easing concern about supply, the nearby WTI contract moved to a discount to the second month
Brent was still in the opposite structure, backwardation, though the premium of nearby Brent over barrels loading in six months
Recession concerns have dominated this week, even with the European Union’s ban on Russian crude looming on Dec. 5 and a tightening of supply by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+.
“On the demand side, there are concerns about an economic slowdown,” said Avatrade’s Naeem Aslam. “The path of least resistance seems skewed to the downside.”
The Fed is expected to raise rates by a smaller 50 basis points (bps) at its Dec. 13-14 policy meeting after four consecutive 75 bps hikes, a Reuters poll showed.
OPEC+, which began a new round of supply cuts in November, holds a policy meeting on Dec. 4. (Additional reporting by Sonali Paul in Melbourne and Muyu Xu in Singapore Editing by Mark Potter, Louise Heavens and David Goodman )
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