Oil declined as broader market sentiment soured and mild winter temperatures in may parts of the globe eased fears of an energy crisis.
West Texas Intermediate fell 4.2% to settle below $77 a barrel, the biggest drop since mid-November. Oil fell as equity market losses accelerated and the dollar rose the most in nearly three weeks, making commodities priced in the currency more expensive.
Meanwhile, above-average temperatures in the US and Europe eased fears of an energy crunch that had been predicted to trigger outages. Diesel futures plummeted and natural gas fell to an 11-month low.
Crude eked out a small gain in 2022, a year that was marked by huge volatility. Prices surged in the wake of Russia’s invasion of Ukraine, only to lose ground amid concerns about a global recession. In the new year, investors are watching for Russia’s reaction to energy sanctions and the fallout in China from its swift pivot away from Covid Zero. A question mark also remains over whether the Organization of Petroleum Exporting Countries and allies will cut supply again.
WTI for February delivery fell $3.33 to settle at $76.93 a barrel in New York.
Brent for March settlement dropped $3.81 to settle at $82.10 a barrel.
Despite the day’s losses, there are some signs traders have grown more optimistic about the market’s direction as China emerges from Covid’s grip. Last week, money managers boosted net-bullish bets on the Brent benchmark by the most since July 2021. Hedge fund trader Pierre Andurand has been among those forecasting a surge in oil demand if the world fully emerges from Covid restrictions.
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