A pending EU embargo on oil from Russia, the bloc’s major supplier of crude and fuel, is projected to further tighten global supplies.
Oil prices closed mixed on Thursday as supply concerns and geopolitical tensions in Europe gave financial markets the upper hand over economic fears as inflation surged. Brent crude fell 6 cents to $107.45 a barrel. WTI crude was up 42 cents, or 0.4%, at $106.13. “Trading has been thin and no one knows what’s moving the needle,” said John Kilduff, partner at Again Capital LLC in New York.
A pending EU embargo on oil from Russia, the bloc’s major supplier of crude and fuel, is projected to further tighten global supplies.
The EU is still considering the details of the Russian sanctions, which require unanimous support. However, a vote has been delayed as Hungary opposes the ban as it would be too disruptive to its economy.
Broadly speaking, rising interest rates, the strongest US dollar in two decades, inflation and concerns over a possible recession have weighed on oil prices and financial markets this week.
The prolonged COVID-19 lockdown in China, the world’s top crude importer, has also affected the market.
“The decline in demand growth could not have come at a better time, with China on the verge of shutting down Beijing’s capital at any time,” said Bob Yeager, director of energy futures at Mizuho.
The US headline CPI jumped 8.3% in the 12 months to April, fueled by concerns about major interest rate hikes and their impact on economic growth.
“Rise in pump prices and slow economic growth are expected to improve demand for the rest of the year and through 2023,” the International Energy Agency (IEA) said in its monthly report on Thursday.
“The extended lockdown across China … is causing a significant slowdown in the world’s second largest oil consumer,” the agency said.
The Organization of the Petroleum Exporting Countries (OPEC) cut its forecast for world oil demand growth for the second consecutive month in 2022, citing the impact of Russia’s invasion of Ukraine, rising inflation and a resurgence of the Omicron coronavirus variant in China.
Oil prices rose 5% on Wednesday after Russia sanctioned 31 companies based in countries that imposed sanctions on Moscow after Ukraine’s invasion.
This caused unease in the market at the same time that the flow of Russian natural gas to Europe via Ukraine fell by a quarter. It was the first time that exports through Ukraine have been interrupted since the invasion.
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