Oil swung in a volatile session as traders weighed tightness in the physical market against macroeconomic concerns that are clouding crude’s demand outlook. 

West Texas Intermediate traded below US$89 a barrel in a volatile session, tracking equity markets. Traders are digesting messaging that the Federal Reserve will need to leave borrowing costs higher for longer, strengthening the dollar in the last few sessions. 

“Oil’s downward move has very little to do with fundamentals and all to do with rising Treasury yields and the stronger U.S. dollar,” said Warren Patterson, head of commodities strategy at ING Groep NV. “I still think oil has some room to move higher. Fundamentally, it is looking constructive.”

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Adding to bearish headwinds, Russia is mulling lifting its overseas diesel export ban, but a final decision has yet to be made. Russia, the world’s single biggest seaborne exporter of diesel-type fuel, shocked global markets after setting a temporary ban on shipments abroad last month.

Fears about the global economy’s health have pushed WTI down about 5 per cent since last Wednesday’s close, halting a rally that saw it surge to $95 a barrel last week. Higher interest rates make storing and shipping crude more expensive, and the strengthening dollar means crude is pricier for most buyers. The reversal has come despite a spate of purchases of key oil grades by the trading arm of China’s top refiner. 

OPEC+ ministers will meet to review global markets on Wednesday. Delegates from the group don’t expect the panel to recommend any policy changes.

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  • WTI for November delivery was little changed at $88.92 a barrel at 10:52 a.m. New York.
  • Brent for December settlement fell 0.3 per cent to $90.40 a barrel.