Oil gives up gains for the year, closing at 2022 low

Brent closes at its lowest level of the year in the United States. fuel inventories are piling up more than expectedChina’s easing of COVID restrictions to support demandInvestors wary of recession warnings and rate hike prospects

HOUSTON, Dec 7 (Reuters) – The price of oil fell to its lowest level this year on Wednesday, reversing all gains since Russia’s invasion of Ukraine exacerbated the worst global energy supply crisis since decades.

The world’s most actively traded commodity jumped to nearly $140 a barrel in March, near an all-time high, following the launch of what Moscow called a ‘special operation’ in Ukraine that has been raging for ever since. during.

The market continued to decline in the final months of the year as economists braced for weakened global growth, in part due to high energy costs. Wednesday’s losses were driven by larger-than-expected increases in fuel inventories in the United States.

Brent crude futures fell $2.18, or 2.8%, to $77.17 a barrel, settling comfortably below the previous year-end low of $78.98 on a barrel hit on the first day of 2022. U.S. West Texas Intermediate crude fell $2.24, weakening further from Tuesday’s close, which was already a yearly low, at $72.01 a barrel.

The recent declines have come in what should be a favorable backdrop for prices. China, the world’s largest importer of crude, has announced the most sweeping changes to its anti-COVID regime since the start of the pandemic. The country’s crude oil imports in November rose 12% from a year earlier to their highest level in 10 months, the data showed.

The G7 countries have launched the implementation of a price cap to restrict Russian exports, which could lead to this country reducing its production in the coming year.

U.S. distillate inventories posted a 6.2 million barrel increase, according to the Energy Information Administration, far beating estimates of a 2.2 million barrel increase. Gasoline inventories rose 5.3 million barrels against expectations for an increase of 2.7 million barrels.

The increase in fuel inventories offset a draw of 5.2 million barrels in crude inventories. The American Petroleum Institute had reported a drawdown on crude inventories of about 6.4 million barrels, according to market sources.

Meanwhile, at least 20 tankers queuing off Turkey face more delays crossing Russian Black Sea ports to the Mediterranean as operators rush to adhere to newly added Turkish insurance rules ahead of a G7 price cap on Russian oil, sources said on Tuesday.

Russia, the daily Vedomosti reported on Wednesday, is considering options such as banning oil sales to certain countries to counter price caps imposed by Western powers.

“There are still tons of uncertainty in the markets today,” said Claudio Galimberti, senior vice president of Rystad Energy, adding that crude production in Russia may not fall as much as earlier expected.

Still, warnings from major US banks of a likely recession next year weighed. The net long position of hedge funds is now at its lowest level in six years, with some large funds having been liquidated in the past few days, said Dennis Kissler, senior vice president of trading at BOK Financial.

Additional reporting by Rowena Edwards in London and Trixie Yap in Singapore, editing by David Gregorio, Kirsten Donovan

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