Oil inched lower as long-term demand concerns about China and the rest of the global economy dampened sentiment even as a raft of earnings buoyed Wall Street. West Texas Intermediate settled below $85 as traders remained glued to the outlook for economic growth and further central rate hikes. Earlier Monday, crude slipped below $83 a barrel as investors digested Chinese economic data that showed a mixed recovery during the third quarter but regained some footing as earnings results showed US companies held their ground amid mounting slowdown concerns. Nonetheless, Treasury Secretary Janet Yellen cautioned investors at a speech in New York that stresses in the global market could disrupt a US financial system, which has so far proved resilient in the face of multiple shocks.
“Oil prices continue to have trouble maintaining altitude as economic turbulence around the globe is shifting focus from the market being undersupplied to a potential economic crash,” said Phil Flynn, a senior market analyst at Price Futures Group. Crude has lost a third of its value since June as fears over a global economic slowdown continue to hang over the market. However, significant OPEC+ output cuts and looming European Union sanctions on Russian oil flows have raised concerns about an energy crunch heading into winter. For now though, traders remained glued to the outlook for economic growth and further central bank hikes.
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The decision by the Organization of Petroleum Exporting Countries and its allies to curb supply from November drew a sharp rebuke from the US, which previously called on producers for more oil to help curb inflation. President Joe Biden’s top energy adviser said Sunday the cut was largely a political move. Brent futures remained backwardated, a bullish structure where near-dated contracts are more expensive than later-dated ones. The prompt time spread widened to as much as $2.25 in backwardation, compared with $1.44 a week earlier.
WTI for December delivery fell 47 cents to settle at $84.58 a barrel.
Brent for December settlement dipped 24 cents to $93.26 a barrel.
Substantial headwinds for oil continue to emanate from China. The potential for rebounding Chinese demand dimmed as President Xi’s leadership changes have “fueled speculation that tackling Covid and maintaining national security are being prioritized above economic considerations, which is depressing the oil demand outlook,” said Harry Altham, an analyst at brokerage StoneX Group. China also recently imposed Covid-19 curbs in Guangzhou, a southern Chinese manufacturing hub.
China ramped up its oil imports and processing last month as refineries returned from seasonal maintenance, while exports of fuel products jumped after the allocation of new quota. Inbound shipments rose to the highest since May, according to Bloomberg calculations based on government data.