By Barani Krishnan
Oil bulls’ hopes for $100 a barrel may have to wait for now.
The much-touted OPEC+ production cuts from two weeks ago took global crude benchmark Brent to less than $2 from triple-digit pricing, a level not seen since August. The long oil crowd has been hopeful since of recapturing the momentum from March when Brent virtually struck $140. Bets have been heavy that December would be the month for that, when a G7 price cap on Russian oil comes into force, further squeezing global supply.
Yet, a Reuters report on Friday suggested that Russia was in a position to largely skirt the price cap, with enough tankers to ship most of its oil despite arduous U.S. efforts to restrict passage for such shipment in order to curb Moscow's wartime revenue.
The report led to swings in both Brent and U.S. crude’s West Texas Intermediate benchmark as traders also pondered about the Federal Reserve’s forthcoming rate hike on November 2, aside from concerns about a U.S. recession and whether China would be open for business as usual after this with fewer COVID lockdowns.
“It continues to look like oil is establishing a new range, after a host of factors caused massive swings in the price, including the increasingly pessimistic global economic outlook and the huge two million cut to output from OPEC+,” said Craig Erlam, analyst at online trading platform OANDA.
London-traded Brent settled up $1.12, or 1.2%, at $93.50 per barrel. Earlier, it fell as much as $1.37 to reach a session low of $91.01. For the week, the global crude benchmark rose 2%.
New York-traded WTI settled up 54 cents, or 0.6%, at $85.05 a barrel, after a session bottom at $83.16. For the week, the U.S. crude benchmark was up also up 0.6%.
Friday’s action was characteristic of the volatility in oil since the OPEC+ move of two weeks ago that sent crude prices up as much 17% that week, only for a 7% tumble the following week.
In Thursday’s session, reports that Beijing was “easing” on Covid restrictions — reducing the quarantine period for visitors to seven days from 10 — sent crude rallying almost 3% before the market gave back a chunk of those gains by the close on fresh tremors over hawkish Fed talk.
Philadelphia Fed President Patrick Harker raised the inflation-fighting ante among the central bank’s speakers when he admitted that “the Fed is actively attempting to slow the economy in order to reduce high inflation.”
Unlike Harker, many Fed speakers have refused to openly say that the United States needs to have slower, or even negative, growth in order to curb inflation stubbornly hovering around four-decade highs of more than 8% a year.
Economists have accused the Fed of being slow itself to the inflation-fight and say its move to overcompensate its inaction with the most aggressive rate hikes in 40 years will almost certainly trigger a recession. Most of the central bank’s senior officials refute that assertion.