LONDON, Dec. 6 (Reuters) – Oil prices fell in a volatile market on Tuesday as a stronger US dollar and economic uncertainty offset the bullish impact of a price cap on Russian oil and prospects for increased demand in China.
Brent crude futures fell 90 cents, or $1.09%, to $81.78 a barrel by 1055 GMT. West Texas Intermediate Crude Oil (WTI) fell 79 cents, or $1.03%, to $76.14.
Earlier in the session, both contracts fell more than $1 while Brent was up more than $1 in Asian trading.
Crude futures recorded their biggest daily decline in two weeks on Monday after data from the US services sector pointed to a strong US economy.
The data bolstered investor beliefs that the Federal Reserve may hold on to aggressive rate hikes for longer, supporting the US dollar index on Tuesday.
A stronger dollar makes dollar-denominated oil more expensive for buyers holding other currencies, reducing demand for the commodity.
“Inflationary headwinds could still cause global economic turbulence in the coming months,” said Tamas Varga of oil broker PVM, but added that “the gradual opening of COVID in China is a positive development for now.”
In China, more cities are easing COVID-19-related restrictions, leading to optimism about increased demand from the world’s largest oil importer.
The country will announce further easing of some of the world’s toughest COVID curbs as early as Wednesday, sources said.
The market weighed in on the production impact of a $60/bbl price cap on Russian crude imposed by the Group of Seven (G7), the European Union and Australia, adding to market volatility.
The price cap comes on top of the EU’s embargo on Russian crude oil imports by sea and similar commitments from the United States, Canada, Japan and Britain.
Russia has declared its intention not to sell oil to anyone who signs the price cap.
The threat of loss of insurance will limit Russia’s access to the tanker market and could reduce crude oil exports by 500,000 barrels per day from February, Rystad Energy analysts said in a note.
Russia’s oil and gas condensate from January to November rose 2.2% from a year earlier to 488 million tons, according to Deputy Prime Minister Alexander Novak, who expects a slight drop in production due to the latest sanctions.
Reporting by Rowena Edwards in London, additional reporting by Muyu Xu in Singapore; edited by Jason Neely
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