Oil drops as supply concerns ease

Oil prices are hovering near two-month lows amid easing concerns about fuel supplies. At the same time, fears about crude oil demand in China, as well as rising interest rates, put pressure on oil prices.

As refineries piled up stocks ahead of an EU embargo on Russian oil, Europe's limited crude oil reserves have eased. This factor puts pressure on physical markets for crude oil in the US, Europe, and Africa.

According to EU's energy policy chief, the EU expects the regulation to be completed in time for the introduction of the G7 plan to cap Russian oil prices on Dec. 5.

In a note, RBC Capital analyst Mike Tran said that tight global inventories do not support the surplus of barrels rationale for contango. He added that despite weakness in the North Sea and West African spot markets, there are no signs of distress.

Growth in demand for oil from the world's largest importer remains slow due to COVID-19 restrictions. At the same time, expectations of further interest rates in other countries led to the growth of the US Dollar, which made dollar-denominated goods more expensive for investors.