Oil prices finished lower on Monday, after posting back-to-back session gains, as the Organization of the Petroleum Exporting Countries said in a monthly report that uncertainties surround the outlook for global crude supplies, and also slightly reduced its forecast for oil demand.
The move for oil marks a shift from early Monday gains on the back of reports that Beijing could further ease “COVID zero” policy despite ongoing lockdowns in some cities.
West Texas Intermediate crude for December delivery
lost $3.09, or 3.5%, to settle at $85.87 a barrel on the New York Mercantile Exchange after trading as high as $89.57 early in the session. The front-month contract had posted gains in each of the past two sessions, but still marked a decline of 3.9% last week, according to Dow Jones Market Data.
In its closely followed monthly market report, OPEC modestly revised lower its forecast for global oil demand while making small tweaks to its supply forecasts and holding off from making changes to its global economic growth forecasts.
Read The Wall Street Journal: Oil Market Faces ‘Considerable Uncertainties,’ OPEC Warns
OPEC lowered its global oil demand growth forecast for 2022 by 100,000 barrels a day to 2.5 million barrels a day.
That’s “in large part due to China’s anti-COVID measures — a move which markets will likely interpret as a pretext for further demand cuts by the group,” said Harry Altham, energy analyst, EMEA & Asia for StoneX Group, in Monday’s market commentary.
On Monday, however, reports said some Chinese cities have started to reduce routine commodity COVID-19 testing.
“China is to reduce its mass testing requirements, release people from quarantine camps and further reduce restrictions on entry requirements for foreigners,” said Altham, adding that general optimism has boosted the Hang Seng Index by 20% over the last two weeks. He emphasized, however, that a “full economic reopening appears to be some way off.”
Then again, with China looking to ease COVID restrictions, and a planned price cap early next month on Russian oil potentially taking Russian oil barrels off the market, Tariq Zahir, managing member at Tyche Capital Advisors, told MarketWatch that he sees risk for the energy markets to the upside.