Oil dropped as additional COVID-related lockdowns in China heightened risk-off sentiment across markets, halting the rally that followed the OPEC+ meeting earlier this week. 

Brent crude dropped 3.04 per cent to settle at US$92.83 a barrel Tuesday. West Texas Intermediate was little changed at US$86.88 compared to its Friday settlement; markets in New York didn’t register a closing price on Monday due to the US holiday. Saudi Arabia cut oil prices for customers in Asia from a record as COVID-19 restrictions and sagging economies cool energy demand in the region. Virus-related lockdowns in China spread, reigniting fears of a global slowdown.

“Energy traders appear to be skeptical of any rallies as they digest a plethora of global economic challenges, a wrath of uncertainty to supplies, and looming crude demand destruction fears,” said Ed Moya, senior market analyst at Oanda.

On Monday, WTI rallied over US$90 a barrel as the Organization of Petroleum Exporting Countries and allies including Russia agreed to shave a modest 100,000 barrels a day off production. 

Oil’s drop in the summer months is the latest chapter of a tumultuous year, with prices driven higher in the first half by Russia’s invasion of Ukraine, then undermined as central banks shifted tack and Moscow managed to keep most exports flowing. Crude’s recent slump prompted OPEC+ to cut its production for the first time in more than a year, a sign the production group is serious about managing global markets. 

“Fundamentally we’re probably moving in the right direction in terms of calming the oil market, but all of that friction out there related to Russia seems like it’s only going in one direction,” Jeff Brown, president of consultant FGE, said in a Bloomberg TV Interview. “OPEC is essentially signaling that we don’t like US$90 a barrel. They’re pretty much at production limits, so let’s defend a high price.” 

The group’s move “signals a willingness to resume active market management to avert a major sell-off due to recession concerns or expectations of policy-driven supply increases,” RBC Capital Markets LLC analysts including Helima Croft said in a note. “They are seeking to put short-sellers on notice that they will not easily surrender the recent gains and go gently into the night.”


  • WTI for October rose 1 cent from Friday to settle at US$86.88 a barrel in New York.
  • Brent for November settlement dropped US$2.91 to settle at US$92.83 a barrel.

Oil traders are also wrestling with the growing energy crisis in Europe. Governments are patching together emergency measures to support utilities amid concerns that companies will buckle under the weight of growing margin calls.