Mon. Nov 28th, 2022

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Oil drops with output cuts weighed against second-wave angst

1 min read

Oil edged lower as investors weighed signs major producers are continuing to cut output against fears of a second coronavirus wave.

Futures in New York fell below $37 a barrel after rising 2.4% on Monday. Saudi Arabia cut term supplies to some Asian refiners by as much as 40% and Iraq said it will make deep reductions as they comply with the OPEC+ deal. U.S. shale is also still in retreat, with the Energy Information Administration forecasting output will drop to 7.63 million barrels a day in July.

The production curbs are going some way to offsetting worries about a new virus outbreak in Beijing as well as sharp increases in infections in some U.S. states including Arizona and Florida. In a move that also helped to counter these concerns, the Federal Reserve said it would start buying a broad portfolio of corporate bonds, aiding sentiment across financial markets.

Crude has rebounded rapidly from its plunge below zero in April as production cuts kicked in, although the rally fizzled out last week as second-wave concerns surfaced. While demand has started to come back in some areas, particularly China, the market may need to see more of a broad recovery in consumption before pushing significantly higher.

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