Oil fell for the first time in eight sessions as traders took stock of the outlook for worldwide demand, with China’s reopening delivering a lift while other parts of the global economy slow.
West Texas Intermediate fell below $79 a barrel after rallying more than 8% last week. China ditched Covid-19 curbs in late 2022 after years of strict lockdowns. The change set to improve economic activity and mobility, and analysts are forecasting oil demand in the world’s top crude importer will likely hit a record.
Crude has had a bumpy start to the year, collapsing in the opening week before rebounding. In addition to China’s swift pivot, support for crude prices in recent sessions has come from a weaker dollar and growing expectations that the Federal Reserve is nearing an end to rate hikes. Traders also are tracking the effect of sanctions on Russian oil and product flows.
The drop in oil is “probably a temporary pause after a strong rally last week,” said Giovanni Staunovo, an analyst at UBS AG. Market outlooks this week from the Organization of Petroleum Exporting Countries and the International Energy Agency “have the potential to support prices on stronger Chinese demand,” he said.
WTI for February delivery eased 1.3% to $78.85 a barrel on the New York Mercantile Exchange
Brent for March settlement was 82 cents lower at $84.46 a barrel on the ICE Futures Europe exchange
OPEC turns in its analysis on Tuesday, and the IEA’s is the next day. Extra commentary may come from the World Economic Forum in Davos. Trading volume was lower than usual on Monday as some US-based investors were away during a federal US holiday.
Timespreads show a mixed picture. Brent’s prompt spread — the difference between its two nearest contracts — is in contango, a bearish pattern that indicates ample near-term supply. Still, the three-month differential for the global benchmark is in the opposite, backwardated structure.
(with assistance from Yongchang Chin)
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