Oil gives up the year's gains, closing at 2022 low

By Reuters December 7, 2022 | 05:12 pm PT

Oil pours out of a spout from Edwin Drake's original 1859 well that launched the modern petroleum industry at the Drake Well Museum and Park in Titusville, Pennsylvania, U.S., October 5, 2017. Photo by Reuters/Brendan McDermid

The price of oil fell to its lowest level this year on Wednesday, forfeiting all of the gains since Russia's invasion of Ukraine exacerbated the worst global energy supply crisis in decades.

The world's most actively traded commodity surged to nearly $140 a barrel in March, close to an all-time record, following the launch of what Moscow called a "special operation" in Ukraine that has raged ever since.

The market has been steadily declining in the latter months of the year as economists brace for weakened worldwide growth in part due to high energy costs. Wednesday's losses were driven by bigger-than-expected increases in U.S. fuel stocks.

Brent futures fell $2.18, or 2.8%, to $77.17 a barrel, settling comfortably below the year's previous closing low of $78.98 a barrel touched on the first day of 2022. U.S. West Texas Intermediate crude fell $2.24, weakening further from Tuesday's close, which was already a yearly low, to $72.01 a barrel.

The recent declines have come against what should be a supportive backdrop for prices. China, the world's biggest crude importer, announced the most sweeping changes to its anti-Covid regime since the pandemic began. The country's crude oil imports in November rose 12% from a year earlier to their highest in 10 months, data showed.

G7 nations kicked off implementation of a price cap to restrict Russian exports that could cause that nation to reduce output in the coming year.

U.S. distillate stocks posted a build of 6.2 million barrels, according to the Energy Information Administration, far exceeding estimates for a 2.2 million barrel rise. Gasoline inventories climbed 5.3 million barrels against expectations for an increase of 2.7 million barrels.

The build-in fuel stocks outweighed a 5.2 million barrel draw in crude stocks. The American Petroleum Institute had reported a crude stocks draw of around 6.4 million barrels, according to market sources.

Meanwhile, at least 20 oil tankers queuing off Turkey face more delays to cross from Russia's Black Sea ports to the Mediterranean as operators race to adhere to new Turkish insurance rules added ahead of a G7 price cap on Russian oil, sources said on Tuesday.

Russia, the Vedomosti daily reported on Wednesday, is considering options including banning oil sales to some countries to counter the price cap imposed by Western powers.

"There's still tons of uncertainty in the markets today," said Claudio Galimberti, senior vice-president at Rystad Energy, adding crude production in Russia may not drop as much as expected earlier.

Still, warnings from big U.S. banks about a likely recession next year weighed. The net speculative fund long position is now at a six-year low with some prominent funds liquidating in the past few days, said Dennis Kissler, senior vice president of trading at BOK Financial.