A barrel of North Sea Brent crude for May delivery closed below $100 on Tuesday for the first time since the second day of Russia’s invasion of Ukraine nearly three weeks ago.
The price of Brent fell 6.53% to 99.91 dollars, while the barrel of West Texas Intermediate (WTI) for delivery in April fell 6.37% to 96.44 dollars.
“After falling more than 20% from last week’s peaks, crude oil entered bearish territory,” said Fawad Razaqzada of ThinkMarkets.
Sanctions against Russia gradually hit its economy, but other countries will also feel it
“China had the biggest impact” on prices on Tuesday, argued Stephen Schork of the Schork Report. The Chinese decision to order the confinement of tens of millions of people to contain covid outbreaks “clearly raises concerns in the market about the demand” for crude oil.
China is the world’s largest importer of oil with 10 million barrels per day.
“The risk to Chinese demand is real,” Rystad Energy’s Louise Dickson said in a note, pointing to a potential drop in crude consumption of half a million barrels a day due to the lockdowns.
However, “China has shown in the past its ability to quickly contain the spread” of the virus “and the impact on energy demand has manifested itself in the short term,” said Bart Melek of TD Securities.
Black gold prices also fell in reaction to hopes that “talks between Russia and Ukraine will lead to a de-escalation of the conflict,” according to Ricardo Evangelista of ActivTrades.
WTI also in decline
According to data at the end of operations on the New York Mercantile Exchange (Nymex), WTI futures contracts for delivery in April subtracted 6.57 dollars from the previous close.
The value of Texas crude thus fell more than 20% from the level it reached a week ago, when it ended the day at $123.70 a barrel, the highest settlement since August 2008 and which was a reaction to the invasion of Russian forces from Ukraine.
Texas oil rose to $113.72 a day after shedding more than 12%
Experts point out that the reason for the drop lies mainly in the lower demand expected from China, after massive confinements were decreed due to an increase in coronavirus cases.
They point out, however, that this sharp decline in the price of “black gold” could be short-lived, since the cut in supply caused by the US and Canadian ban on buying Russian oil has not yet been processed.
“The temporary improvement with cheaper oil could be short-lived, however, and the price drop indicates that the market has not yet really realized the potential impact that lost Russian barrels can have on supply. global,” Rystad Energy analyst Louise Dickson explained in a note.
Other analysts point to the confusion in the oil market, where volatility has reigned since the invasion of Ukraine.
“There is not much clarity about what is really going to happen in the future with the supply of crude oil as a result of the conflict,” said CIBC Private Welath US specialist Rebecca Babin, for whom the market is showing optimism “without a real change of the facts”.
Meanwhile, natural gas contracts for April delivery fell 9 cents to $4.57 per thousand cubic feet, and gasoline contracts due the same month fell 17 cents to $3 a gallon. (I)
Source: Eluniverso
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