By Adedapo Adesanya
Brent crude fell below the $80 mark after it dropped 4 per cent or $3.33 to $79.35 per barrel on Tuesday as investors fled the volatile oil market in an uncertain economy.
Also, the United States West Texas Intermediate (WTI) crude futures depreciated by 3.5 per cent or $2.68 to settle at $74.25 per barrel yesterday.
Prices have dropped by more than 1 per cent for three straight sessions, giving up most of their gains for the year as a string of bearish news has unnerved investors despite an ongoing war in Ukraine and one of the worst energy crises in recent decades.
To spur the outcome was unimpressive data out of China which showed that Service-sector activity in the world’s second-largest economy had hit a six-month low.
China’s services activity shrank to six-month lows in November as widening COVID containment measures weighed on demand and operations, a private-sector business survey showed on Monday, pointing to a further hit to economic growth.
The Caixin/S&P Global services purchasing managers’ index (PMI) fell to 46.7 from 48.4, marking the third monthly contraction in a row. The 50-point index mark separates growth from contraction on a monthly basis.
Also, European economies have slowed due to the high cost of energy and rising interest rates.
The oil market has also largely overlooked threats to supply, such as the one from a G7 price cap of $60 on Russian seaborne crude oil exports, which is likely to make the country cut its oil output.
Russia, in response, has said it will not sell oil to anyone who signs up for the price cap.
In China, more cities are easing COVID-19-related curbs, prompting expectations of increased demand in the world’s top oil importer, although that has not been enough to stop the bleed in oil futures.
Chinese authorities have been loosening some of the world’s toughest COVID curbs to varying degrees and softening their tone on the threat of the virus, in what many hope could herald a more pronounced shift towards normalcy three years into the pandemic.
The loosening of the rules comes after a string of protests last month that marked the biggest show of public discontent in mainland China since President Xi Jinping took power in 2012.
Market analysts warn that oil will likely stay volatile in the near term, driven by COVID headlines in China and central bank policies in the US and Europe.
Modupe Gbadeyanka