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Oil advances as tighter supply clashes with slowdown concerns

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(Bloomberg) – Oil gained amid a broader market rally as investors continued to weigh a tight market against worries about a global economic slowdown.

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West Texas Intermediate rose above $86 a barrel, with a weaker dollar also making commodities denominated in the currency more attractive. While time gaps signal tightening ahead of OPEC+ production cuts from November, bearish factors such as weak Chinese demand and aggressive central bank monetary policy continue to weigh on the market.

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The market is “in limbo at the moment with a negative macro backdrop and a tighter supply outlook,” said Warren Patterson, head of commodities strategy at ING Groep NV. “At the moment, I suspect the market is more concerned about the implications of a slowdown on demand.”

Crude has lost about a third of its value since early June, wiping out any gains made after Russia invaded Ukraine. European Union sanctions against the OPEC+ producer are expected to come into effect from December, prompting traders and refiners to set aside storage tanks in anticipation of a supply shortage.

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The war also led a number of companies to reduce their investments in Russia. Exxon Mobil Corp. said it had completed its exit from the country, calling the departure an “expropriation” of its main Russian operation and potentially opening up a future legal challenge.

China has pledged to stick to its Covid Zero policy, a strategy that has battered its economy and reduced its energy consumption. China’s decision to delay the release of key economic data, including third-quarter gross domestic product, prompted caution in the region’s trade.

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The United States is moving toward releasing an additional 10-15 million barrels of oil from the country’s emergency stockpile in a bid to balance markets and keep gasoline prices from rising further, according to reports. people close to the file. Separately, the Biden administration is still weighing limits on fuel exports, two of the people said.

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