Oil closes with no single signal, with dollar, China and EU action against Russia

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Oil futures contracts did not have a single direction, this Thursday (1st) after strong gains from the previous session. The commodity was supported by the retreat of the dollar, with attention also to the prospect of potential relaxation in China’s stricter rules to contain covid-19.

At the same time, the European Union (EU) had internal talks to move forward with a price cap on Russian oil in order to punish Moscow for the war in Ukraine.

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WTI crude for January closed up 0.83% ($0.67) at $81.22 a barrel on the New York Mercantile Exchange (Nymex), and Brent for February fell 0.10% ( US$0.09), at US$86.88 a barrel, on the Intercontinental Exchange (ICE).

In exchange, the dollar retreated against other strong currencies, which makes oil, quoted in the American currency, cheaper for holders of other currencies and supports demand.

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In addition, there continued to be focus on the possibility that Beijing will relax its current strict policy to contain covid-19. Commerzbank believes the easing will take place, but warns that the process will not be quick.

According to Oanda, oil was supported by hope that China will continue to relax restrictions against the virus. She believes that the price of contracts should find a range to oscillate, before the decision of the Organization of Petroleum Exporting Countries and allies (OPEC +) on possible adjustments in its strategy for the market, and sees an important point of resistance in WTI in US $84.55 a barrel and a support level at $81.20 a barrel.

On OPEC+, for Oxford Economics the group of producers should consider bigger cuts in production, to support prices. The consultancy believes, however, that OPEC+ should maintain the current policy, leaving any changes to 2023, when there is more clarity about adjustments in China’s strategy against covid-19 and the impact of the planned ceiling for Russian oil.

Barring any headwinds, Oxford expects Brent to average $92.10 a barrel in 2023.

In the EU, the agency Dow Jones Newswires reported, from sources, that negotiations were advancing to impose a ceiling on the price of Russian oil. The bloc’s intention is to punish Russia for the war in Ukraine, but without this causing higher energy prices.

Source: CNN Brasil

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