Oil Falls As Markets Fear Further Action From U.S. Fed

News of economic prowess rarely provokes a massive drop in oil prices, however, this week’s robust U.S. economic data, with both labor figures and industry PMI coming in well above expectations, helped to achieve the opposite. Apart from the Russian oil price cap, Chinese demand, and others, the prospect of the U.S. maintaining higher interest rates for longer is slowly becoming a mainstream idea as inflationary pressures weigh on mid-to-long-term market sentiment.

Saudi Arabia Edges Closer to China. Saudi Crown Prince Mohammed bin Salman will host China’s President Xi Jinping this week, indicating Riyadh is ready to diversify its key partnerships at a historic low point in Saudi-U.S. relations and sees Beijing as a crucial economic partner in diversifying away from oil and gas.

After the Group of Seven agreed on a $60 per barrel price cap last Friday, the new measure came into effect this week amidst repeated pledges from Russia not to sell any oil to countries that are participating in the price-capping.

The Biden administration will convene a meeting this week with oil and gas executives to discuss how the US could support rebuilding Ukraine’s energy infrastructure as winter approaches.

The Turkish government has started asking every tanker passing through the Turkish straits to provide protection and indemnity (P&I) insurance documentation, with at least 21 tankers held off in anchorage zones in the Black Sea.

After Chevron was re-authorized to operate in Venezuela and expand production, US refiners such as Valero (NYSE:VLO) or PBF Energy (NYSE:PBF) have expressed their interest in getting access to the oil major’s new Venezuelan output.

The Tripoli-based GNU government of Libya has lifted the force majeure for oil and gas operations in the country, inviting all international oil companies that have valid contracts with the LNOC to resume drilling at their respective projects.

Up 16% over October, Venezuela exported just south of 620,000 b/d of oil last month, thanks to increased production coming from two restarted crude upgraders PDVSA operates with CNPC, with the Chevron deal setting the stage for further upticks.

Nigeria’s Supreme Court allowed UK-based energy major Shell (LON:SHEL) to appeal a ruling that ordered it to pay a 1.8 billion oil spill penalty, a key element in a dispute that has so far barred the oil firm from selling its stakes in Nigerian onshore assets.

Putting an end to a month-long price rally, U.S. gasoline prices are now declining again with every single state seeing a drop last week and the national average price falling 16 cents from a week ago to $3.4 per gallon.

A UN-brokered round of negotiations on a global plastics treaty confirmed the political interest for such a move, however, as usual, countries have split on whether goals should be global and mandatory, or voluntary and country-specific, with the latter group represented by the U.S. and Saudi Arabia.

For the third straight week, investors have been selling off oil futures and options contracts as the most recent readings show them exiting an equivalent of 42 million barrels with almost all of it being cleared from the Brent contract (-39 million barrels).

The second-largest commodities trading firm Trafigura has signed a $3 billion four-year loan to supply gas to Germany’s ailing gas trader Sefe, formerly known as Gazprom Germania, with the loan being syndicated by over 25 banks.

The United States and the European Union are weighing new tariffs on Chinese steel and aluminum, representing 60% and 57% of global output, respectively, arguing China’s overcapacity represents a heightened climate risk.