(Bloomberg) -- Oil settled little changed, paring earlier gains, after a drop in broader equity markets countered optimism that China may ease quarantine restrictions.
West Texas Intermediate's more active December futures contract settled near $85 a barrel after a choppy session. Prices have been oscillating within a narrow band since late-September, taking cues from fluctuating risk sentiment in broader markets. Earlier in the session, prices rallied as Chinese bureaucrats debated whether to reduce mandatory-quarantine periods for visitors.
The market is “still searching for a direction,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management. “The market may be reaching a point where it's finding a bit more of a range until we really understand that there's a trend to global economic activity.”
Crude has seen choppy trading this month, with the market caught between worries about a global economic slowdown and supply curbs from the Organization of Petroleum Exporting Countries and its allies. The US has released oil from emergency reserves to cool prices, while also saying it will refill that supply if prices are at or below $67 to $72.
“The Biden administration basically put in hard floor for WTI crude,” said Ed Moya, senior market analyst at Oanda Corp. “Which means oil should remain supported if China doesn't suffer a major Covid setback.”
China's Covid Zero strategy, which relies on mass testing and lockdowns to stamp out infections, has added to bearish factors weighing on global crude demand this year. The shift in policy would need to be approved by senior leaders, so could still be altered or not deployed at all, said one person.
There are still questions about China's demand outlook, with the nation's oil buying muted in the latest trading cycle, even after refiners were allocated new quotas to export oil products. Infections have also swelled in Beijing to the highest in four months, stoking concerns about potential curbs as the flareup worsens in the middle of the twice-a-decade party congress.
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