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Oil fluctuates as economic slowdown weighs on energy markets

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(Bloomberg) – Oil wiped out early gains as fears of an economic slowdown continue to weigh on the demand outlook.

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West Texas Intermediate futures swung between gains and losses near $85 a barrel after adding up to 1.5%. In a speech at the opening of the 20th Communist Party Congress on Sunday, Chinese President Xi Jinping signaled no change in direction for China’s tough Covid Zero policy, a strategy that has weighed on its economy this year.

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Leading oil market indicators in Asia point to weakness as traders watch China’s buying activity for clues on demand from the world’s largest crude importer.

Weak growth in China added to a series of bearish factors for oil, including aggressive monetary policy by central banks to try to control inflation and a stronger US dollar. That eclipsed the OPEC+ alliance’s oil production cuts that take effect from November.

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“The focus shifted to demand after the OPEC+ meeting,” said Hans van Cleef, senior energy economist at ABN Amro. The market is “waiting for the next trigger to give direction”.

Last week, the International Energy Agency warned that production curbs could tip the global economy into recession, while the United States criticized the cuts. White House national security adviser Jake Sullivan said options for reassessing US-Saudi relations include “changes in our approach to security assistance.” He spoke on CNN’s “State of the Union” on Sunday.

“Overall, the path of least resistance remains on the downside, under continued pressure from economic concerns and oil demand,” said Vandana Hari, founder of Vanda Insights.

Trading houses and refiners are rushing to reserve storage tanks in Rotterdam in the coming months as they await supply shortages after EU sanctions on Russia take effect, according to a storage manager at Koninklijke Vopak NV. The storage company has seen increasing inquiries into using its tanks to bring Russian quality from the Urals into the refining hub of northwestern Europe until the deadline of 5 December, the official said.

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