Crude markets plunged on Wednesday after the Group of Seven nations, or G7, was seen setting a much higher-than-expected cost cap on Russian oil sales. The move witnessed traders significantly cutting anticipations that a strict price cap would have pushed Moscow to cut oil production to avoid selling at a loss drastically.
Weak U.S. economic data and record levels of coronavirus infection in China painted a bleak picture for oil demand. U.S. business activity eased in November as the economy faced headwinds from higher interest rates and upbeat inflation, according to preliminary data released Wednesday.
Brent oil futures were about $85.33 a barrel, while West Texas Intermediate futures evened at $77.94 a barrel by 21:43 E.T. (02:43 GMT). Both contracts plunged over 4% on Wednesday and decided at their most vulnerable level behind late September.
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However, the softening of the signal by the Fed against the dollar supported the stabilization of the oil market after heavy losses. In the minutes of the Fed’s November meeting, central bankers said they supported a slower pace of rate hikes over the next few months.
The dollar was down 1 percent late on Wednesday, easing some of the pressure on dollar commodity prices. Increased expectations of a weaker dollar should also help crude oil markets. It will support demand from countries that pay dollars for crude imports.