Oil slipped as weekend comments from a Federal Reserve speaker reignited uncertainty about future rate hikes, pressuring market sentiment and boosting the dollar. 

 

 

West Texas Intermediate futures traded near US$89 a barrel. A rising dollar made commodities priced in the currency more expensive, overshadowing expectations for rising Chinese demand after the nation toned down some of its strict COVID Zero restrictions. The dollar rallied after weekend comments from Fed Governor Christopher Waller that policymakers had “a ways to go” before ending interest-rate hikes.

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Traders balanced broader market fears with ongoing risks to supply, which kept futures locked in a tight range. An increase in Chinese crude consumption could lead to further tightening of the market, which is facing European Union sanctions on Russian oil flows next month. OPEC cut its forecasts for global oil demand on Monday, which some analysts said could signal further production cuts ahead. 

U.S. Treasury Secretary Janet Yellen said Russia will likely have to shut in some of its oil production if it doesn’t abide by a price cap. The European Union is “ready to go” with an effort to impose a price cap on Russian oil, according to the president of the group’s executive arm, Ursula von der Leyen, though a price level has not yet been decided.

Analyst view:

Bjarne Schieldrop, chief commodities analyst at SEB AB:

  • “We think the market dynamics will likely be as follows. Russia has a hard time selling its crude post Dec. 5 due to EU sanctions. Russia rejects selling its crude under the G7 price cap. Less Russian crude is supplied to market. Demand for other crudes goes up. Brent crude prices move significantly higher.”

Prices: 

  • WTI for December delivery fell 21 cents to US$88.75 a barrel at 10:48 a.m. in New York.
  • Brent for January settlement dropped 8 cents to US$95.91 a barrel.