(Bloomberg) — Oil pared losses and climbed from January lows after Saudi Arabia denied a Wall Street Journal report that it is discussing oil-production increases.
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Brent futures traded near $87 a barrel, swinging in over a $5 range on Monday, with volatility jumping the most since late June when the Group of Seven nations started to consider an price cap on Russian crude. Brent plunged and its prompt spread briefly dipped into contango after the WSJ reported that OPEC+ is considering an output hike of 500,000 barrels a day. Saudi Arabia denied the report, adding the “current cut of 2 million barrels per day by OPEC+ continues until the end of 2023.”
The whipsaw in prices served as a reminder of how vulnerable the market remains to sharp swings driven by dueling headlines.
“Trading in a 5% range supports the opinion that the extreme headline risk in the commodity makes it difficult to put real money to work, which has resulted in reduced volumes and open interest through all of 2022,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Management.
Crude has erased the gains made at the start of the quarter, when the Organization of Petroleum Exporting Countries and allies including Russia agreed to reduce production by 2 million barrels a day. A looming European Union ban on Russian seaborne flows and Group of Seven price-cap plan are clouding the outlook, with officials possibly set to announce the cap’s level on Wednesday as they step up their response to Moscow’s invasion of Ukraine.
Goldman Sachs Group Inc. lowered its fourth-quarter forecast for Brent crude by $10 to $100 a barrel, according to a note, with the reduction driven in part by the possibility of further anti-virus measures in China as cases climb.
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–With assistance from Ilena Peng.
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