EU price caps on Russian oil, China's zero-Covid policy and OPEC production plans are weighing on the market
Global oil prices dropped to their lowest level since the start of the year on Monday, November 28, amid falling demand concerns.
Brent crude was down $2.35, or 2.8%, to $81.36 per barrel as of 07:30 GMT. Earlier in the day, the global benchmark had reached $81.16, its lowest level since January 11. The US crude benchmark, West Texas Intermediate (WTI), had slumped by $2.23, or 2.9%, to $74.05 per barrel, its weakest mark since January 6. It briefly dropped to $73.82 intraday, its lowest since December last year.
Both benchmarks have posted three weekly declines in a row, with Brent slumping 4.6% last week, while WTI dropped 4.7%.
"Bearish sentiment is growing in the oil market with mounting concerns over demand in China and a lack of clear signs from oil producers to further cut output," Tetsu Emori, CEO of Emori Fund Management, told Reuters.
Beijing's strict Covid-19 policy is limiting the country's factory activity, which is lowering demand from the world's biggest oil importer.
OPEC and allies, known as OPEC+, have agreed to reduce their production target by two million barrels per day in 2023. It is still unclear whether the group will opt for more cuts when they meet next on December 4.
The market is also uneasy over the proposed EU price cap on Russian seaborne oil, expected to come into force next week. Starting December 5, tankers that fly the flag of any EU member state will no longer be permitted to carry crude originating in Russia, unless it was sold to the buyer at or under an agreed price cap.
The measure has been discussed by the EU and the Group of Seven (G7) representatives over the past several weeks. So far, however, they have failed to agree on the final cap level, which some propose setting between $65 and $70 a barrel, while others want it much lower.
Moscow has repeatedly warned that it will not sell oil to countries that support the price cap mechanism.
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