Oil falls on recession jitters, China curbs COVID

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Crude oil storage tanks are seen at the Kinder Morgan terminal in Sherwood Park near Edmonton, Alberta, Canada November 14, 2016. REUTERS/Chris Helgren

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  • Brent and WTI oscillate between positive and negative
  • Market down despite supply problems from Russia and Kazakhstan
  • Singapore public holiday undermines buying

MELBOURNE, July 11 (Reuters) – Oil prices fell around $1 on Monday in volatile trading, reversing some gains from the previous session, worries about a recession and China’s COVID-19 restrictions. 19 hitting demand outweighing lingering supply shortage concerns.

Brent crude futures fell 82 cents, or 0.8%, to $106.20 at 0314 GMT, after climbing 2.3% on Friday.

U.S. WTI crude futures were down $1.04, or 1%, at $103.75, erasing a 2% gain from Friday.

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Trade was diluted by a public holiday in parts of Southeast Asia, including the oil trading hub of Singapore.

Both contracts posted weekly declines last week as the market was dominated by fears that raising interest rates to curb inflation could trigger a recession and lower demand for oil.

“Net long positions in WTI crude futures are now at their lowest level since March 2020, when demand collapsed amid the initial outbreak of COVID-19. This despite continued signs of tension,” analysts at ANZ Research said in a note.

Both benchmark contracts traded lower in early trading on Monday, then turned positive, then fell again.

Data from July 10 on COVID-19 cases in China showed the numbers had increased from the previous day. Concerns remain over the potential for wider lockdowns following the discovery of a new Omicron sub-variant in Shanghai. Read more

On the supply side, the market remains nervous over plans by Western countries to cap Russian oil prices, with President Vladimir Putin warning that further sanctions could have “catastrophic” consequences for the global energy market. Read more

Another key factor traders will be watching is the maintenance of the Nord Stream 1 pipeline, the largest pipeline carrying Russian gas to Germany, which is due to operate from July 11-21. Governments, markets and businesses fear the shutdown will be extended due to the war in Ukraine. Read more

“The big issue for the markets right now – forget the headlines about COVID and Biden – will be whether Nord Stream will come back,” said Stephen Innes, managing partner at SPI Asset Management.

If the pipeline does not return as planned on July 22, it could lead to a destruction of gas demand in Europe, which would cause an economic slowdown and result in weaker oil demand and stagflation, he said. declared.

“Until we get rid of this major risk event, we will stay in this loop of good and bad in the oil market,” Innes said.

Questions also remain over how long more crude will exit Kazakhstan through the Caspian Pipeline Consortium (CPC).

Supply has continued so far on the pipeline, which carries about 1% of the world’s oil, even after a Russian court last week ordered it to suspend operations.

CPC Blend crude oil exports are expected to rise from 4.86 million tonnes in July to 5.45 million tonnes in August, according to a loading schedule.

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Reporting by Sonali Paul; Editing by Bradley Perrett and Christopher Cushing

Our standards: The Thomson Reuters Trust Principles.

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