Oil Mixed As China Protests Eclipsed By OPEC Rumours

Meanwhile, the Russian cap talks resumed on Monday: File Image/Pixabay

Oil trading on Monday was mixed as street protests against the Covid lockdowns in China vyed for attention with rumours that the Organization of the Petroleum Exporting Countries (OPEC) will enact a production cut when it meets on Dec. 4.

West Texas Intermediate rose 76 cents to $77.04 at 1858 GMT after touching its lowest since Dec. 22, 2021 at $73.60; Brent was down 47 cents at $83.16 per barrel after slumping to $80.61 earlier in the session for its lowest since Jan. 4, 2022.

The earlier declines were triggered by news that hundreds of demonstrators and police clashed in Shanghai on Sunday night, the third straight nights of protests over the government-imposed restrictions that are causing economic bedlam throughout the country and prompting thousands to take to the streets in opposition.

However, Matt Smith, lead oil analyst at Kpler, pointed out that “The word on the street is there’s rumour that OPEC+ is already starting to float the idea of a production cut on Sunday; that’s helped reverse losses that were caused overnight by Chinese protests.”

Phil Flynn, senior market analyst at Price Futures Group Inc., said, “We feel some of the selling based on reports of China uprisings was overdone; inventories are still near record lows and this probably increases the odds of an OPEC production cut.”

Meanwhile, the European Union resumed its discussions about ratifying a watered-down price cap against Russia for its invasion of Ukraine; the cap is due to come into effect on Dec. 5, but by all counts EU governments are still in disagreement about the level at which to cap Russian oil.

It has been argued that if the price is set lower (the proposed cap range is between $65 and $70 per barrel, far above Russian production costs of only $20 per barrel), it could inflame the global energy crisis, particularly if Russia decides to cut production by more than expected.

Craig Erlam, senior markets analyst at Oanda, wrote on Monday, “It’s looking increasingly likely to be done at a level that doesn’t particularly hinder Russia’s ability to sell crude — which is contributing to the drop in oil prices — or put its buyers in an uncomfortable position.”

For its part, Deutsche Bank analysts said Monday that they expected the EU embargo to create a “moderate supply risk” between January and March next year.

As for the former Soviet Union, total volumes of crude shipped from Russia rebounded to 2.89 million barrels per day (bpd) in the seven days to Nov. 25, while the less volatile four-week average continued to slide toward 3 million bpd.

The agency that delivered this news, Bloomberg, noted, “Overall crude shipments from Russian ports have yet to show clear evidence of drying up as a result of impending European Union sanctions, despite a massive diversion from Europe to Asia.”