Oil edges higher after four-day retreat as traders look to China

Crude has weakened this month, shedding all of the year’s gains, as central banks tighten monetary policy and the macroeconomic outlook sours. Fresh curbs on crude from Russia meant to punish Moscow for the war in Ukraine have so far not disrupted trade substantially, although there is a growing blockage of oil tankers in waters off Turkey. In addition, market liquidity has been thinning out as the year-end approaches.

Adding to the downbeat mood, the US Energy Information Administration reported on Wednesday that distillate and gasoline inventories expanded last week, indicating weaker demand in the world’s largest economy. Still, the snapshot also showed another draw in nationwide crude inventories.

Key time spreads are indicating ample near-term supply. WTI’s prompt spread — the difference between the two nearest contracts — is slipping further into a bearish contango structure. The gap was 27 cents a barrel in contango compared with 91 cents in the opposite backwardated structure a month ago.

The Biden Administration, meanwhile, is still weighing the impact of China’s reopening and the price cap on Russian supplies before moving to start replenishing depleted strategic petroleum reserves, according to Amos Hochstein, the State Department’s senior energy security adviser.