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Oil prices fell precipitously out of fears of renewed supply chain disruptions from the world’s largest economy, China, and this did prevent the session from closing in the plus.
Oil was losing ground amid protests in China over renewed restrictions on COVID-19. Anxiety over demand for the commodity, and the fact that investors took a pause while waiting for an agreement on a Western oil price hike from Russia, were key influences.
Brent was down 0.5%, or 44 cents a dollar, having earlier lost 3% to an 11-month low, trading at $80.6 .
WTI crude also posted an 11-month low at $73.6. At the time of writing it is attempting to recover, having gained 1.3% to $77.24 .
Fears of a contraction trumped recent selling, which was triggered by fears that fuel demand would fall due to Chinese restrictions and political instability in China, due to widespread protests by residents.
Forecasts are for WTI to trade between $70-77. Market volatility may be exacerbated by results of OPEC meeting and setting price range for Russian oil by G7.
OPEC is due to meet on 4 December. During the last meeting of the Organisation of the Petroleum Exporting Countries, it was decided to cut oil production by 2m bpd by the end of the year.
G7 countries plan to limit the cost of Russian oil to between $65 and $70, but these measures may have little effect, according to OANDA analyst Craig Erlam.
“The threat to Russian production from the $70 ceiling is minimal, given that it is already traded at these levels,” Erlam said.
The EU ban on Russian oil will take effect from 5 December.
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