Oil falls on demand concerns

Oil started the week losing ground as speculation about weakening global demand grew and investors weighed a raft of details about a U.S.-led plan to try to cap the price of Russian crude. U.S. crude fell to $85 a barrel after a volatile week last week. Concerns persist that the outlook for consumption is worsening as global growth slows and China presses ahead with its strategy to contain COVID-19 by curbing activity. In the U.S. late Friday, the Treasury released guidelines for the private sector to comply with a proposed cap on Russian oil that will take effect in December. Deputy Treasury Secretary Wally Adeyemo said Moscow had no choice but to join in. Crude has fallen by nearly a third since June, giving up all the gains made since Russia invaded Ukraine. The turnaround came as central banks including the Federal Reserve tightened policies to suppress inflation. The US price cap plan, backed by the G7, aims to cut back on Moscow’s revenue from oil sales, cutting the flow of funds used to finance the war. “Fear of a recession in China and potential weak demand for prolonged restrictions loom large,” said Sean Lim, oil and gas analyst at RHB Investment Bank. In China, the world’s biggest oil importer, authorities are intensifying lockdowns and restrictions as a Communist Party convention approaches. Iran nuclear talks have been in focus after Britain, France and Germany said over the weekend they had “serious doubts” about Tehran’s commitment to a new deal. If a deal is reached, it could pave the way for a massive increase in the flow of Iranian crude to the global market. Last week, the Organization of the Petroleum Exporting Countries and its allies, including Russia, cut supplies in a warning that the group was ready to act again if conditions change.