Oil rises after fall to 11-month low

Tokyo/Singapore — Oil rebounded on Tuesday after falling to more than 11-month lows in the previous session, as investors weighed a potential output adjustment from oil producers, who are due to meet this week.

Brent crude futures advanced $1.81, or 2.2%, and traded at $85.00 a barrel at 4.46am GMT. US West Texas Intermediate (WTI) crude futures rose $1.37, or 1.8%, to $78.61 a barrel.

Brent settled down 0.5% the previous day, having slumped more than 3% to $80.61 earlier in the session to its lowest since January 4. WTI settled up 1.3% on Monday after touching its lowest since December 2021.

Though the market is already correcting itself after a sharp drop, word that oil cartel Opec would seriously consider additional production cuts at the upcoming meeting further fuelled the price jump, analysts from Haitong Futures said in a note.

“Although this is merely a guess ... not the official statement from the Opec, it still reflects the near-term market sentiment and is likely to be the turning point of the oil prices,” they said.

Opec and allies including Russia, known as Opec+, are due to hold a meeting on December 4. Analysts at Eurasia Group suggested in a note on Monday that weakened demand out of China could spur Opec+ to cut output.

Opec+ started to lower its output target by 2-million barrels a day in November, aiming to shore up oil prices. But the fear of demand destruction in China kept pressure on the market despite a drop of daily Covid-19 cases on Monday.

“Bearish moods towards oil prices are spreading in Asia due to concerns about a decline in China’s demand while the rare protests over the weekend also raised fears over the impact on Chinese economy,” Toshitaka Tazawa, an analyst at Fujitomi Securities said.

The street protests that erupted in cities across China over the weekend were a vote against President Xi Jinping’s zero-Covid policy and the strongest public defiance during his political career, China analysts said. Beijing has stuck with the zero-Covid policy even as much of the world has lifted most restrictions.

Markets are also assessing the affect of an upcoming Western price cap on Russian oil.

G7 and EU diplomats have been discussing a cap of $65-$70 a barrel, with the aim of limiting revenue to fund Moscow’s military offensive in Ukraine without disrupting global oil markets. But EU governments failed to agree on Monday on the cap, with Poland insisting the cap should be set lower than proposed by the G7, diplomats said.

The price cap is due to come into effect on December 5, when an EU ban on Russian crude also takes effect. 

Reuters