Oil Slumps Further Below $80 as Broad Selloff Dents Markets

Oil fell the most in more than two weeks as broader equity markets collapsed and risk-averse investors pared crude positions ahead of the end of the year.

West Texas Intermediate futures shed 3.8% to settle below $77 a barrel after earlier topping $82 on Monday. Stronger-than-expected US economic data fueled speculation that the Federal Reserve would keep its policy tight to fight inflation, sending a guage of the US dollar higher. Early in the session, WTI gained as much 3.4% gain after China announced further easing of Covid restrictions in some of its largest cities. Monday also marked the beginning of a European Union and Group of Seven cap on Russia crude prices at $60 a barrel

The noise surrounding headlines is keeping traders from engaging in the market, said Rebecca Babin, a senior energy trader at CIBC Private Wealth Management. “Many have decided to tune out altogether. Volumes are light and positioning is decimated as it seems prudent to wait until 2023.”

Oil has swung inside of a $10 range in recent weeks as markets weigh restrictions on Russian supply and China’s gradual reopening against the risk of an economic slowdown in the US and other parts of the world struggling to contain inflation. Futures holdings continue to plunge as the year draws to a close -- open interest in the main oil contracts is the lowest since 2015 -- indicating that traders have pared back positions amid a number of risks, including the future of Russian supply.