Oil turned around and fell more than 3% as concerns over tightening US monetary policy overshadow the positive news.

Oil prices saw a turnaround and fell in Monday’s session (5), with morning news about the decisions of the Organization of the Petroleum Exporting Countries and Allies (OPEC+) and China’s reopening being overshadowed by US news.

The commodity market followed that of US stocks, which recorded a decline, after data from the US services sector raised concerns that the Federal Reserve may continue its aggressive policy to tighten monetary policy, which again raised recession fears, with effects on demand.

Brent crude futures for February 2023 fell 3.38% to settle at $82.68 a barrel on the Intercontinental Exchange, while WTI for January fell 3.81% to settle at $76.93 a barrel on NYMEX. Earlier, Item posted a gain of about 2%.

US service industry activity rebounded unexpectedly in November, after job recovery data provided further evidence of the economy’s momentum.

The news caused oil and stock markets to cut gains.

The data defies hopes that the Federal Reserve may slow the pace and intensity of interest rate hikes amid recent signs of easing inflation.

Macroeconomic concerns about the Fed and what it will do to interest rates are taking root in the market, Phil Flynn, an analyst at Price Futures Group, told Reuters.

OPEC+, previously supportive of the market, agreed on Sunday to stick to its October plan to cut production by two million barrels per day from November to 2023.

“The decision … was not surprising given the uncertainty in the market about the impact of the December 5 EU embargo on Russian crude oil imports and the G7 ceiling,” said Anne-Louise Hittle, vice president of advisory to Wood Mackenzie. “In addition, the group of producers faces downside risks due to the possibility of weakening global economic growth and China’s Covid-zero policy,” he adds.

The Group of Seven countries and Australia agreed last week to a maximum price of Russian seaborne oil of $60 per barrel.

Meanwhile, in a positive sign for fuel demand in the world’s largest oil importer, more Chinese cities eased COVID restrictions over the weekend.

Business and manufacturing activity in China, the world’s second-largest economy, has been hit this year by strict measures to contain the spread of the coronavirus.

(with Reuters)

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