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Oil opened the week with a slump on mounting speculation that global demand is weakening, and as investors assessed a welter of details about an ambitious US-led plan to try to cap the price of Russian crude.
West Texas Intermediate sank toward $85 a barrel after a volatile ride last week, when prices swung in a wide arc only to end little changed. There are concerns the outlook for consumption is worsening as global growth slows and China maintains its strategy of controlling Covid-19 by curbing activity.
In the US late Friday, the Treasury issued rough compliance guidelines for the proposed cap on Russian oil, focusing on the documentation needed by the private sector to adhere to the programme, which is meant to kick in from December as Europe tightens sanctions on flows. Deputy Treasury Secretary Wally Adeyemo said that Moscow would have no choice but to participate.
Crude has sunk by nearly a third since June, shedding all the gains since Russia’s military operation in Ukraine. The reversal has come as central banks including the Federal Reserve tighten policy to quell inflation. The US price-cap plan, which is backed by the Group of Seven, is meant to reduce Moscow’s income from oil sales, squeezing the flow of funds used to finance the conflict.
“Now it seems like potential demand weakness is taking centre stage, in terms of recession fears and prolonged restrictions in China,” said Sean Lim, a Malaysia-based oil and gas analyst at RHB Investment Bank Bhd. – Bloomberg
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