(Bloomberg) -- Oil edged higher as investors juggled an uncertain supply outlook alongside a European Union proposal to soften Russian crude sanctions.
Prices firmed Tuesday after a bumpy ride in the prior session that saw crude briefly plunge on speculation OPEC+ was considering an output hike. Group leader Saudi Arabia and fellow Gulf producer Kuwait both rejected the suggestion, prompting a recovery. West Texas Intermediate futures rose to settle near $81 a barrel.
Meanwhile, the EU watered down its latest sanctions proposal for a price cap on Russia's oil exports. The block proposed adding a 45-day transition to the introduction of the cap, softening key shipping provisions.
Covid concerns have led oil prices lower this month. Looming European sanctions on Russian flows -- and a Group of Seven price-cap plan -- have boosted uncertainty, with Chinese buyers pausing some Russian purchases. The cloudy outlook across the market has affected liquidity, with open interest for WTI the lowest since 2014.
“Crude is still in the process of reversing the OPEC rumor of production increases from yesterday,” said Dennis Kissler, senior vice president at Bok Financial Securities in an interview. “While China's Covid issues are a concern, the price break the past two trading sessions was definitely overstated.”
Crude-consumption trends in China remain in the spotlight as repeated Covid-19 outbreaks prompt officials to press on with lockdowns and curbs on movement, hurting the outlook for demand. This comes just weeks after investors had speculated Beijing may be moving away from its zero-tolerance stance.
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