Oil bounces in volatile session as OPEC headlines cause turmoil

Oil pared losses and climbed from January lows after Saudi Arabia denied a report that it is discussing oil-production increases.

Brent futures traded near $86, after falling below $83 a barrel on Monday.

Saudi Arabia denied reports that OPEC+ is considering an output increase of 500,000 barrels ahead of the EU’s embargo of Russian oil.

The earlier report sent markets spiraling and pushed Brent’s prompt spread briefly into contango, an industry term for when current oil prices are cheaper than contracts for delivery further out.

Prices were still trading lower, pressured by a dimming outlook over Chinese demand.

China saw its first COVID-related deaths in almost six months over the weekend, just as a city of 11 million near the capital asked residents to stay home amid an outbreak, sparking fears of a further wave of restrictions in the world’s biggest oil importer.

Crude has erased the gains made at the start of the quarter, when the Organization of Petroleum Exporting Countries and allies including Russia agreed to reduce production by 2 million barrels a day.

A looming European Union ban on Russian seaborne flows and Group of Seven price-cap plan are clouding the outlook, with officials possibly set to announce the cap’s level on Wednesday as they step up their response to Moscow’s invasion of Ukraine.

Goldman Sachs Group Inc. lowered its fourth-quarter forecast for Brent crude by $10 to $100 a barrel, according to a note, with the reduction driven in part by the possibility of further anti-virus measures in China as cases climb.