LONDON, Dec 6 (Reuters) – Oil prices fell in a volatile market on Tuesday as the U.S. dollar remained strong and economic uncertainty offset the bullish impact of a price cap placed on Russian oil and expectations of a demand boost in China.
Brent crude futures were down 61 cents, or 0.74%, to $82.07 a barrel at 1447 GMT. West Texas Intermediate (WTI) crude fell 51 cents, or 0.66%, to $76.42.
Earlier in the session, both contracts fell more than $1, while Brent rose more than $1 in Asian trading.
Crude futures on Monday recorded their biggest daily drop in two weeks after US services industry data pointed to a strong US economy and spurred expectations of higher-than-expected interest rates recently.
The US dollar index edged lower on Tuesday but was still boosted by bets on higher interest rates, following the biggest rally in two weeks on Monday.
A stronger greenback makes dollar-denominated oil more expensive for buyers holding other currencies, reducing demand for the commodity.
“Inflationary headwinds could still cause global economic turbulence in the coming months,” said Tamas Varga of oil broker PVM, but added that “the gradual opening of COVID in China is a tentatively positive development”.
In China, more cities are easing curbs linked to COVID-19, prompting expectations of rising demand in the world’s top oil importer.
The country is expected to announce further relaxation of some of the world’s toughest COVID curbs as early as Wednesday, sources said.
The market was weighing the impact of a $60 per barrel price cap on Russian crude imposed by the Group of Seven (G7), the European Union and Australia, contributing to market volatility.
The price cap adds to the disruption caused by the EU embargo on seaborne Russian crude imports and similar pledges by the US, Canada, Japan and Britain.
The embargo is likely to tighten market supply as the EU has to source crude from elsewhere, Commerzbank analyst Carsten Fritsch said in a note.
Russia has stated its intention not to sell oil to anyone who signs the price cap.
The threat of losing insurance will limit Russia’s access to the tanker market and could reduce crude exports by 500,000 barrels per day from February levels, analysts from Rystad Energy said in a note.
Russia’s January-November oil and gas condensate production rose 2.2% from a year earlier to 488 million tonnes, according to Deputy Prime Minister Alexander Novak, who expects a slight drop in output following the latest sanctions.
Reporting by Rowena Edwards in London, additional reporting by Muyu Xu in Singapore; edited by Jason Neely and Barbara Lewis
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