The price of oil fell to its lowest in 2022 as markets factor in the effect of the global economic slowdown. China has lifted some Covid restrictions but weak trade data means markets don’t expect an immediate recovery of Chinese demand. Further signs that the global economy is slowing and expectations of recession in developed economies has seen the price of oil drop around 20% over the last month. Brent crude has fallen from $95 a barrel in early November to $77 this week.
The OPEC+ cartel agreed to maintain current production targets after it cut output by 2 million barrels a day in October but these cuts failed to prop up the oil price. This week also saw the EU and G7 agree a price cap of $60 a barrel for Russian oil exports. Russian oil already trades at that level so the cap had no immediate effect on oil prices. Russia says it will refuse sales below the cap but it needs to find buyers to replace lost European sales. This will determine if the cap succeeds and if there will be a long-term impact on oil prices.
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