Oil futures: Prices ease further amid demand concerns, Brent around $94/b

Quantum Commodity Intelligence – Crude oil futures Tuesday were again lower after the previous-session's late selloff, as markets gave up some of last week's strong gains on renewed demand fears.   

Front-month December ICE Brent futures were trading at $93.98/b (1845 GMT), compared to Monday's settle of $96.19/b.  

At the same time, Nov22 NYMEX WTI was trading $88.96/b versus Monday's settle of $91.13/b.

Prices came under pressure as inflationary concerns were again flagged, raising the prospect of further aggressive US rate hikes, in turn capping global growth and boosting the value of the dollar.

"A recessionary economic outlook will lead to lower oil demand," said Fitch Ratings. "However, we expect pricing volatility to remain high in the short term as geopolitical factors, such as further sanctions leading to a reduction in Russian exports."

Those political factors could alter supply patterns and cause greater price volatility, Fitch added.

"Fears of a global economic recession are still a headwind for oil prices. But another reason that prices remain below $100 a barrel is that policy has become so unpredictable," Energy Aspects founder Amrita Sen wrote in the FT, noting uncertainty on Europe going ahead with the December embargo against Russian oil that could further elevate crude prices.

OPEC

Fitch also said OPEC+'s decision to cut production quotas by 2 million bpd would only have a muted impact on the oil supply market as actual output cuts will be smaller.

It said Saudi Arabia and the UAE would have to make the largest actual cuts to production, while many other countries, including Nigeria, have some headroom under their quotas to increase their production.

However, the OPEC cut coincides with EU sanctions against Russia tightening. Last week, the bloc endorsed a G7 plan to impose a price cap on Russian oil exports, further curtailing Russian supplies as Moscow steps up attacks on Ukraine.

Analysts noted that falling Russian exports appear to be already priced in, with only a moderate reaction to the widespread strikes against Ukraine.

"The oil market even seemed to shrug off Russia's latest attacks on a number of Ukrainian cities, including Kyiv. This lack of reaction is likely due to the limited potential actions the West could take to further hit Russian oil exports," said Warren Patterson, head of ING's commodity research.

Meanwhile, the remnants of tropical storm Julia crossed Mexico's Yucatan peninsula and enter the southern Gulf of Mexico. Although forecasters give only a relatively small chance of reforming into a significant storm, oil platforms in the Bay of Campeche have been put on alert.