(Bloomberg) — Oil pared losses and climbed from January lows after Saudi Arabia denied a Wall Street Journal report that oil production increases are being discussed.
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Brent futures were trading near $87 a barrel, swinging above $5 on Monday, with volatility jumping the most since late June, when the Group of Seven nations began considering a price cap on Russian crude. Brent plunged and its immediate spread dipped briefly into contango after the WSJ reported that OPEC+ is considering a 500,000 bpd production increase. Saudi Arabia denied the report, adding “the current cut of 2 million barrels per day by OPEC+ will continue until the end of 2023.”[ads1];
The whipsaw in prices served as a reminder of how vulnerable the market is to sharp swings driven by dueling headlines.
“Trading in a 5% range supports the view that extreme headline risk in the commodity makes it difficult to put real money to work, resulting in reduced volumes and open interest throughout 2022,” said Rebecca Babin, senior energy manager. trader at CIBC Private Wealth Management.
Crude has erased gains from the start of the quarter, when the Organization of the Petroleum Exporting Countries and allies including Russia agreed to cut production by 2 million barrels a day. A looming EU ban on Russian seaborne flows and the Group of Seven tariff plan cloud the outlook, with officials likely to announce the cap level on Wednesday as they step up their response to Moscow’s invasion of Ukraine.
Goldman Sachs Group Inc. cut its fourth-quarter forecast for Brent crude oil by $10 to $100 a barrel, according to a note, with the reduction partly driven by the possibility of further anti-virus measures in China as cases rise.
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–With assistance from Ilena Peng.
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