January 27, 2023

US crude turns positive, and Brent crude offsets production losses due to OPEC+ rumors

US crude turns positive, and Brent crude offsets production losses due to OPEC+ rumors

  • US crude reverses losses due to rumors of OPEC+ production cuts
  • WTI hit the lowest since December 2021, and Brent hit the lowest since January 2022
  • Clashes in Shanghai as COVID protests erupt across China

(Reuters) – U.S. crude turned positive and Brent pared losses on Monday after falling to near a one-year low, as rumors of an OPEC+ production cut offset concerns about street protests against strict curbs on the spread of the coronavirus in China. The largest importer of crude oil in the world.

Price action has been volatile. US West Texas Intermediate crude was up 76 cents, or 1%, at $77.04 at 1:58 PM ET (1858 GMT), after touching its lowest since Dec. 22, 2021, at $73.60.

Brent crude also turned positive briefly, but was last down 47 cents, or 0.6%, when trading at $83.16 a barrel, after falling more than 3% to $80.61 earlier in the session for its lowest level since January 4, 2022.

Both benchmarks, which hit 10-month lows last week, posted three straight weekly declines.

“The word on the street is that there are rumors that OPEC+ is already starting to float the idea of ​​cutting production on Sunday,” said Matt Smith, senior oil analyst at Kpler. “It helped reverse the toll of the Chinese protests overnight.”

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia will meet, in what is known as OPEC+, on Dec. 4. And in October, OPEC+ agreed to cut production target by 2 million barrels per day until 2023.

Rumors of a possible sale cut were clouded earlier news Hundreds of demonstrators and police clashed in Shanghai on Sunday night as protests over COVID restrictions broke into a third day and spread to several cities.

China has stuck to President Xi Jinping’s COVID-free policy even as much of the world has lifted most restrictions.

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“We feel some of the selling based on reports of China’s uprisings has been overblown,” said Phil Flynn, an analyst at Price Futures Group. “Inventories are still near their lowest levels and this probably increases the odds of an OPEC production cut.”

Meanwhile, diplomats from the Group of Seven (G7) industrialized nations and the European Union have discussed a cap on the Russian oil price of between $65 and $70 a barrel, aimed at limiting revenues to fund Moscow’s military offensive in Ukraine without disrupting global oil markets.

However, EU governments have been divided over the level at which to cap Russian oil prices, with the effect likely to be muted.

The price cap is due to come into effect on December 5, when the European Union’s ban on Russian crude takes effect.

(Reporting by Nia Williams) Additional reporting by Noah Browning in London, Yuka Obayashi in Tokyo, and Mohi Narayan in New Delhi; Editing by Margarita Choi, Chris Reese, and Cynthia Osterman

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