OIL TOUCHES 10-MONTH LOWS

OIL PRICES dropped to their lowest since early January yesterday after the Wall Street Journal reported that Saudi Arabia and other Opec oil producers were discussing an output increase.

Brent crude futures for January had slipped $4.07, or 4.7%, to $83.55 (about R1 440) a barrel by 5.18pm.

US West Texas Intermediate (WTI) crude futures for December were down $4.02, or 5%, at $76.06 a barrel ahead of the contract’s expiry last night. The more active January contract was down $3.82, or 4.8%, at $76.29 a barrel.

A rise of up to 500 000 barrels per day would be discussed at the Opec+ meeting on December 4, The Wall Street Journal reported. Reuters was not immediately able to verify the report.

Opec+, recently cut production targets and de facto leader Saudi Arabia’s energy minister was quoted this month as saying the group would remain cautious.

Meanwhile, supply fears have largely receded while concerns over Chinese fuel demand and dollar strength weighed on prices.

Expectations of further increases to interest rates have buoyed the greenback, making dollar-denominated commodities more expensive for investors.

“Apart from the weakened demand outlook due to China’s Covid curbs, a rebound in the US dollar today (yesterday) is also a bearish factor for oil prices,” said CMC Markets analyst Tina Teng.

“Risk sentiment becomes fragile as all the recent major countries’ economic data point to a recessionary scenario, especially in the UK and euro zone,” she said.

New Covid case numbers in China remained close to April peaks as the country battles outbreaks nationwide.

The front-month Brent crude futures spread narrowed sharply last week while WTI flipped into contango, reflecting dwindling supply concerns. I Reuters