West Texas Intermediate slipped to settle below $83 a barrel Wednesday. Crude whipsawed, rising early in the session to as high as $86 after Vladimir Putin called for substantially more troops to widen the war in Ukraine. Those gains were erased as the Federal Reserve meeting came into focus. The US central bank raised interest rates by 75 basis points for the third consecutive time, a move that could trigger an economic recession.

“Crude prices remained heavy after the Fed signaled they are going to continue to bring down inflation with more rate hikes even as the economy slows,” said Ed Moya, senior market analyst at Oanda.

US crude stockpiles climbed by 1.14 million barrels last week, while a measure of distillate demand — which includes diesel — fell to the lowest seasonal level in more than a decade, according to an Energy Information Administration report. The drop in fuel demand comes at a time when consumption typically picks up.

Crude is on track for its first quarterly loss in more than two years as concerns over a global economic slowdown weigh on the outlook for energy demand. The Fed decision will be followed by other central banks from Europe to Asia, which are also expected to increase borrowing costs.

Adding to bearish sentiment, China issued a giant new quota to export refined fuels, according to a local industry consultant, which could weigh on oil product markets.

Earlier on Wednesday, Putin said Russia will safeguard its sovereignty and defend territory with all available meand, announcing a call-up of reservists. The move threatened to escalate the Ukraine conflict further, with the Kremlin moving to stage sham votes on annexing regions that it holds.

Prompt spreads, meanwhile, which are an indicator of near-term supply and demand tightness, were impacted by a fire at BP Plc’s refinery in Ohio that led to two fatalities. WTI’s prompt spread — the difference between the two nearest contracts — was at 51 cents after narrowing by 16 cents.

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Oil held gains after recovering from a weak start as declines in the US dollar offset concerns that global demand is under pressure.

West Texas Intermediate settled at $87.8 a barrel for the day after earlier sinking to $85. Risk sentiment generally firmed across markets on Monday with equity markets climbing in Europe and the American currency weakening sharply as traders bet inflation is near a peak. A weaker greenback tends to benefit assets priced in the currency.

China’s efforts to suppress Covid-19 by curbing activity has weighed on oil prices with their potential of slowing down global demand. Nonetheless, some analysts see a host of bullish factors that could elevate prices heading into the end of the year.

A lot has turned bullish for oil today — the dollar rally halted on optimism that inflation will continue to cool; Iran nuclear deal talks stalled, which delays the idea that any relief to supplies will be happening anytime soon,” said Ed Moya, senior market analyst at Oanda.

“Food and medical shortages in China raise the prospects that President Xi will soon have to abandon their zero-Covid policy. The oil market still remains tight and the latest plunge was overdone,” Moya added.

Crude has sunk by almost a third since June, shedding all the gains since Russia’s invasion of Ukraine. The reversal has come as central banks, including the Federal Reserve, tighten policy to quell inflation. Still, back-to-back declines in the dollar have helped oil recover from its lows in recent days, while a spate of Chinese crude purchases has spurred some optimism that the real-world market for barrels may have bottomed.

The conclusion of the Biden Administration’s US strategic oil releases, harsher European sanctions that start on Dec. 5 and gas-to-oil switching would also support oil prices, Rebecca Babin, a senior energy trader at CIBC Private Wealth Management said during a Bloomberg MLIV event.

“Looking out for rest of 2022, we see prices moving higher with WTI in the $95-$105 range and Brent $100-$110,” she said.

Chinese authorities have intensified lockdowns and restrictions lately as a key Communist Party meeting looms. Reflecting the challenges, UBS Group AG trimmed its December Brent crude forecast by $15 a barrel. An outbreak at a top Beijing media school should be stamped out “in the shortest period of time,” local government officials said Sunday.

“Everyone’s worried about this slowdown in demand. But boy, we better hope for a slowdown in demand because we’re running out of oil in the SPR and if China reopens, we’re not going to have enough oil to meet that demand,” said Phil Flynn, senior market analyst at Price Futures Group.

The US has released barrels from its strategic reserve this year in an attempt to offset supply tightness but those volumes are set to end shortly, and barrels in underground caverns are at the lowest levels in almost three decades.

In the US late Friday, the Treasury issued rough compliance guidgelines for the proposed cap on Russian oil, focusing on the documentation needed by the private sector to adhere to the program, which is meant to kick in from December as Europe tightens sanctions on flows. Deputy Treasury Secretary Wally Adeyemo said Moscow would have no choice but to participate.

Iranian nuclear talks were also in focus as the UK, France and Germany said over the weekend that they have “serious doubts” about Tehran’s commitment to a new agreement. Should a pact be agreed to, it could pave the way for greatly increased flows of Iranian crude to the global market.

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Oil mustered a late comeback after dropping to six-month lows this week as a softer dollar bolstered trader demand across assets.

West Texas Intermediate settled above $86 a barrel, finishing a tumultuous week nearly flat with the prior seven days. At the start of the week both benchmarks, WTI and Brent, slipped to lows not seen since the start of year. Extended Covid lockdowns in China are deepening concerns that demand for oil will shrink The dollar rallied for much of the week, adding another headwind to commodities priced in the currency. However, a sharp reversal Friday lifted oil and other riskier assets. “The broader market rally is helping push crude prices higher,” said Ed Moya, senior market analyst at Oanda. “China’s inflation numbers were promising and that is giving hope that central banks won’t have to be as aggressive with tightening over the next few months.”

Crude is down about $40 from its closing high earlier this year and the market has been beset by volatility ever since Russia invaded Ukraine. For much of the period since March, daily trading volumes have been below the 200-day average. Liquidity across commodity markets has also faced scrutiny amid Europe’s energy crisis, with the region’s ministers gathering in Brussels Friday. Crude’s slump this week presents a challenge for the Organization of Petroleum Exporting Countries and its allies after they announced a nominal output cut at the start of the week, which triggered a short-lived rally. The reduction surprised many traders, who had expected no change from OPEC+ no change.

Despite the current bout of market weakness, US officials are hunting for ways to head off a feared spike in oil prices later this year, including the possibility of an additional release from strategic crude reserves. The officials are warning of a potential increase in prices this December when EU sanctions on Russian energy supplies take effect, unless other steps are taken.

On Thursday, US government data showed a large buildup of crude inventories, which swelled by a greater-than-expected 8.8 million barrels. At the same time, a gauge of gasoline demand sank below 2020 seasonal levels.

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