Oil fell for the fourth session as warnings from major US banks about a difficult outlook for 2023 raised concerns about the demand outlook and reduced appetite for risky assets, including commodities.
WTI fell below $74 a barrel, after futures fell nearly 9% over the previous three sessions despite optimism surrounding China's move to ease tough virus restrictions.
Among the predictions, Goldman Sachs CEO David Solomon said he saw "challenging times ahead".
Crude oil is approaching the end of the year, as US crude is heading for its first consecutive quarterly decline since mid-2019 as central banks tighten their policy. The latest leg of the slide comes at a complex moment, as traders weigh the implications of G7 restrictions on Russian oil, including price caps. The decline comes on the back of dwindling liquidity, with falling interest rates fueling volatility.
James Whistler, managing director of brokerage Vanier Global Markets, said recession fears "has gripped the market as traders contemplate tightening monetary policy". “We are also seeing an early pullback in liquidity, with traders exiting positions after a very volatile year.”
In response to the cap, which has been set at $60 a barrel, Russia is considering setting a floor price for its international oil sales. Moscow may either impose a fixed price on the country's barrels, or impose a maximum discount on the international benchmark on which it bases its oil valuation.
Traders are tracking Chinese President Xi Jinping's visit to Saudi Arabia this week, during which he will participate in a summit with Saudi Crown Prince Mohammed bin Salman. China is the world's largest importer of crude oil, while Saudi Arabia is the driving force of OPEC.
OPEC and its allies held their production policy unchanged at the end of last week.
The time difference indicator shows ample crude supplies in the near term, with the three-month spread for Brent crude trending more towards the contango case, in which the spot or nearer-term prices are lower than the longer-term futures contracts. The gap between the two prices reached 60 cents per barrel, compared to more than $4 in the opposite case called "backwardation" that appeared on those contracts a month ago.
Meanwhile, the American Petroleum Institute reported that US inventories fell by more than 6 million barrels last week, according to people familiar with the matter. Official inventory data follows later on Wednesday.
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