Crude Oil Steadies as Supply Angst Vies With Slowdown Concerns

(Bloomberg) -- Oil traded in a narrow range as investors weighed supply concerns against the impact on demand of a global economic slowdown.

West Texas Intermediate was little changed below $92 a barrel, after easing on Monday as China reaffirmed its commitment to Covid Zero as local cases climb. Traders are gauging the likely impact of looming European Union curbs on Russian oil flows amid the war in Ukraine, as well as the recent move by the Organization of Petroleum Exporting Countries and its allies to curb production.

Crude has slumped by about a quarter from its June highs as signs of a global slowdown, tighter monetary policy, and a strong US dollar weighed on prices. US inflation data due on Thursday will yield additional clues about the strength of inflationary pressures and the likely next steps by the Federal Reserve, which has been jacking up interest rates at a rapid clip this year.

“Oil markets found themselves in a bit of limbo yesterday as the bullishness of China’s possible reopening hit a snag,” said James Whistler, managing director of brokerage Vanir Global Markets Pte in Singapore. Still, “fundamentals remain pointed towards a bullish outlook,” he said, citing the OPEC cut and looming Russian sanctions, which may propel Brent back above $100 a barrel.

At present, China, the world’s largest oil importer, is sticking to a blend of mass testing and lockdowns to combat Covid-19, although Goldman Sachs Group Inc. said in a note on crude markets that officials are now in preparation for an eventual reopening, possibly next year. On Monday, more than 7,000 local cases were reported, the highest daily number in over six months.

Americans, meanwhile, head to the polls on Tuesday for midterm elections to decide control of both chambers of Congress, the governorship in 36 states, and other local races. Ahead of the contests, President Joe Biden ordered the release of crude from strategic stockpiles to help rein in gasoline prices.

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