(Bloomberg) -- Oil rose as US inventories fell, the dollar eased and traders tracked the fallout from Group of Seven sanctions on Russian crude exports.
West Texas Intermediate gained toward $79 a barrel after rallying more than 5% in the week’s first three sessions. The Energy Information Administration reported a 5.9-million-barrel draw in commercial stockpiles last week, with nationwide holdings at the lowest level for this time of year since 2014. The US currency eased, making commodities more attractive for overseas buyers.
The G-7 has imposed a $60-a-barrel cap on Russian oil and curtailed access to services including insurance unless cargoes are bought at or below that figure. The move is meant to punish Moscow for the invasion of Ukraine while keeping crude flowing, but an initial Bloomberg tally showed shipments had fallen.
Oil is poised to end an extraordinarily volatile year modestly higher as traders attempt to gauge the market’s trajectory in the opening months of 2023. Among the main drivers are risks of recessions in the US and Europe as central banks continue to tighten policy, the impact on demand of China’s reopening after it jettisoned its Covid Zero policy, and whether the Organization of Petroleum Exporting Countries and its allies will cut supply further.
“It’s quite frothy in thin liquidity and the gains look exaggerated to me, even given the draw in US inventories,” said Vandana Hari, founder of Vanda Insights. “Demand worries will prevail over any short-term props.”
The swift pivot in China toward reopening may help to rekindle energy demand in the world’s largest crude importer, although as Covid cases rise in the near term there’s been a slump in mobility in some places including Shanghai.