Singapore — Oil prices hovered near two-month lows on Monday as supply fears receded while concerns over China’s fuel demand and rising interest rates weighed on prices.
Brent crude futures for January had slipped 28c, or 0.3%, to $87.34 a barrel by 3.03am after settling at their lowest since September 27.
US West Texas Intermediate (WTI) crude futures for December were at $80 a barrel, down 8c, before the contract’s expiry later on Monday. The more active January contract fell 21c to $79.90 a barrel.
Both benchmarks closed Friday at their lowest since September 27, extending losses for a second week, with Brent down 9% and WTI 10% lower.
The front-month Brent crude futures spread narrowed sharply last week while WTI flipped into a contango, reflecting dwindling supply concerns.
Tight crude supplies in Europe have eased as refiners have piled up stocks ahead of the December 5 EU embargo on Russian crude, putting pressure on physical crude markets across Europe, Africa and the US.
The EU’s energy policy chief said the EU expected to have its regulations completed in time for the introduction of a G7 plan to cap the price of Russian crude on December 5.
RBC Capital analyst Mike Tran said the weak December WTI contract expiration indicated paper market selling rather than true physical market softness.
“Tight global inventories do not support the traditional surplus of barrels rationale for contango,” he said in a note.
While North Sea and West African spot market indicators are far from strong, they are also not suggesting signs of distress, he added.
Diesel markets remained tight, with Europe and the US competing for barrels. While China nearly doubled its diesel exports in October from a year earlier to 1.06-million tonnes, the volume was well below September’s 1.73-million tonnes.
Demand in the world’s top crude importer remains bogged down by Covid-19 restrictions while expectations of further interest rate rises elsewhere have elevated the greenback, making dollar-denominated commodities more expensive for investors.