Oil Prices Near 2-Month Lows as Supply Concerns Ease

Oil prices remained at two-month lows Monday as supply fears abated and China's gasoline consumption and rising interest rates weighed on the market.

Brent oil futures for January slipped 28 cents, or 0.3%, to $87.34 a barrel, their lowest level since September 27.

U.S. West Texas Intermediate (WTI) oil futures for December were trading at $80 a barrel, down 8 cents. January contract fell 21 cents to $79.90 per barrel.

Brent and WTI fell 9% and 10%, respectively, to their lowest prices since September 27.

Last week, the front-month Brent and WTI crude futures spreads narrowed sharply, reflecting diminishing supply anxieties.

As refiners stockpiled ahead of the December 5 EU oil embargo, tight crude supplies in Europe loosened, putting pressure on crude markets in Europe, Africa, and the U.S.

EU's energy policy chief told Reuters that the EU plans to finish its laws by December 5, when a G7 pact to regulate Russian oil prices takes effect.

RBC Capital analyst Mike Tran said the dismal December WTI contract expiry was due to paper market selling, not physical market weakness.

"Tight global inventories don't sustain barrel excess contango," he added.

Although North Sea and West African spot market indicators are weak, they don't imply alarm.

Europe and the U.S. fought for restricted diesel barrel markets. China's diesel exports nearly doubled year-over-year to 1.06 million tonnes in October, but were lower than September's 1.75 million tonnes.

COVID-19 restrictions continue to stifle demand in the world's leading crude importer, while expected interest rate hikes elsewhere have boosted the dollar, making dollar-denominated commodities more expensive for investors.