US crude prices fell below $100 a barrel on Tuesday to their lowest level in two weeks, as demand outlook was weighed by coronavirus lockdowns and rising recession risks in China, while a stronger dollar weighed on other currencies. Made crude oil more expensive for the users to use.
US crude prices fell below $100 a barrel on Tuesday to their lowest level in two weeks, as demand outlook was weighed by coronavirus lockdowns and rising recession risks in China, while a stronger dollar weighed on other currencies. Made crude oil more expensive for the users to use.
US West Texas Intermediate crude fell $3.33, or 3.2%, to $99.76 a barrel, while Brent crude was down $3.48, or 3.28%, to $102.46 a barrel. Both the benchmarks were down for the second day in a row and had earlier fallen by over $4 a barrel on Tuesday.
Wall Street’s main indexes also eased in volatile trade on concerns of a tightening of aggressive monetary policy and slowing economic growth.
At the start of the session, comments by Saudi and UAE energy ministers raised Brent and WTI by more than $1 a barrel.
“These are volatile times, these days the daily price bars get bigger,” said John Kilduff, partner at Again Capital LLC.
“As the EU is concerned about whether or not they are going to ban that Russian oil, that very much turns the calculus in both directions,” he said.
The EU Commission has delayed action on the proposal. A ban on oil imports from Russia requires consensus, and while a French minister said EU members could reach a deal this week, Hungary has opposed a ban in its heels.
In addition, some European economies could face a crisis if Russian oil imports are further cut. If Russia retaliates by cutting gas supplies, economies in emerging Europe, Central Asia and North Africa could return to pre-pandemic levels, the European Bank for Reconstruction and Development (EBRD) warned.
In addition to the recent G7 gradual import ban on Russian oil, Japan, which received 4% of its oil imports from Russia last year, has agreed to phase out those purchases. Its timing and manner have not yet been decided.
Tamas Varga of broker PVM Oil Associates said, “The combination of the COVID-related lockdown in China and interest rate hikes across the globe puts equity investors on the backfoot to fight inflation, strengthen the dollar and concerns of an economic slowdown. Increases it a lot.”
Robert Yoger, executive director of Energy Futures at Mizuho, said China becomes more selective in crude, with a sharp drop in demand in China due to the lockdown and market-relaxed Russian barrels.
Cleveland Federal Reserve Chair Loretta Meester said a half percentage-point hike in US interest rates “makes perfect sense” for the next few meetings of US central bank policy, while Bundesbank chief Joachim Nagel said the European Central Bank Should raise interest rates in July. ,
The dollar was near a two-decade high before reading on inflation that could hint at a Fed policy outlook.
On the supply side, the US Energy Information Administration lowered its US crude oil production forecasts for 2022 and 2023. It now expects production to average 11.9 million barrels per day (bpd) in 2022, compared to its previous estimate of 12 million bpd.
Crude shares rose 1.6 million barrels for the week ended May 6, while analysts polled by Reuters had expected a draw of 500,000 barrels, according to market sources citing data from the American Petroleum Institute.[API/S][EIA/S]
European refiners’ stocks of crude and oil products stood at about 1 billion barrels in April, down 10.3% on a year-on-year basis, but at roughly the same level in March, data from Eurooilstock showed. The data showed Middle Distillate stock fell 15.4% year over year in April and nearly 3% from March.
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