Crude oil prices erased most of their 2022 gains and could head lower
Tom Kaye of Plymouth, Pennsylvania tops off his neighbor’s gas tank for them on at a gas station in Wilkes-Barre, Pennsylvania, U.S. October 19, 2022.
Aimee Dilger | Reuters
Oil prices are defying expectations and are barely higher on the year, as the outlook for oil demand continues to deteriorate for now.
West Texas Intermediate crude futures for January were just above $77 per barrel in afternoon trading, following a drop to $73.60 per barrel, the lowest price since last December. WTI was up more than 2% for the year, after turning negative earlier Monday.
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Gasoline prices at the pump have also been falling dramatically and could be cheaper than last year for many Americans by Christmas, according to an outlook from the Oil Price Information Service. On Monday, the national average was $3.546 per gallon of regular unleaded fuel, down from $3.662 a week ago but still higher than the $3.394 a year ago, according to AAA.
‘Macro headwinds rather than tailwinds’
China’s lockdowns and the rare protests against Beijing this weekend have raised more doubt about the outlook for the country’s already weakened economy.
“We think the recessionary [forces] around the world, particularly in the three largest economies, are dominating the macro environment for the year as a whole, and we think that the issues we’ve been identifying as relatively bumpy in the period ahead are going to remain,” said Ed Morse, global head of commodities research at Citigroup. “Right now, we are looking at macro headwinds rather than tailwinds.”
Morse was one of the more bearish strategists on Wall Street in 2022, but he said the latest market developments and the hit to major economies made even his forecast too bullish. He had revised his outlook higher at the end of the third quarter, based on the shift by OPEC+ to focus on prices and the pending ban of Russian crude by Europe.
The oil market has been focused on those two potential catalysts for higher prices, but the impact on demand from the slowdown in China and new lockdowns has outweighed concerns about supply for now. The European Union’s ban on purchases of seaborne Russian oil takes place Dec. 5. The EU is also expected to announce price caps for Russian crude.
OPEC+ is also a factor. The group includes OPEC, plus other producers, including Russia. The group surprised the market in October when it approved a production cut of 2 million barrels a day.
“We’re waiting to see if they signal even deeper cuts. There were rumors in the market about that happening,” said John Kilduff, partner with Again Capital. After dipping to the day’s lows, oil rebounded on Monday as speculation circulated about new OPEC+ cuts, he said.
Brent futures, the international benchmark, was lower Monday at $83.11, recovering from $80.61 per barrel, the lowest price since January.
“Right now the target is below $60 [for WTI]. That’s what the chart is…
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