Oil getting cheaper waiting for data on stocks in U. S.
2022.12.29 07:47
Oil getting cheaper waiting for data on stocks in U. S.
Budrigannews.com – Oil prices fell on Wednesday due to concerns that the rise in COVID cases in China following its reopening, which coincides with the onset of recession in Western economies and stifles fuel demand growth, will impede China’s economic recovery.
Futures were down 0.8 percent at $78.90 a barrel by 04:30 ET (9:30 GMT), while the contract was down 0.6 percent at $84.19 a barrel.
Crude prices reached their highest level in three weeks on Tuesday as a result of China’s announcement earlier this week that it will no longer require inbound travelers to undergo quarantine.
However, in the absence of a successful mass vaccination program, this policy has led to an increase in COVID-19 infections, placing a significant strain on the nation’s hospitals.
Given that China is the world’s largest crude importer, the opening of the Chinese economy is clearly a winner for the oil market. However, as the country struggles with an increase in infections, any increase in demand may be delayed.
At the same time, central banks aggressively tighten monetary policy to combat soaring inflation as many western economies enter recession, likely reducing demand for energy products.
For instance, Luis de Guindos, vice president of the European Central Bank, stated on Tuesday that the euro area is facing a “very difficult economic situation” that will put individuals and businesses to the test.
Additionally, the supply equation remains hazy.
Oil refiners in the United States are working to reopen a dozen facilities that were shut down by the winter storm across a large portion of the country as the country continues to experience a deep freeze.
In addition, Russian President Vladimir Putin stated that Moscow intends to prohibit oil sales to nations that adhere to the G7 price cap, which began at the beginning of December.
In 2023, oil markets will be affected by the course of the Russia-Ukraine conflict. In a note, analysts at ING stated, “While a de-escalation might not lead to the return of pre-war oil trade flows, it would remove a lot of supply risk from the market.”
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Back in the United States, the industry group will publish data on crude inventories later on Wednesday. Stocks are expected to have decreased, adding to the 3 million barrel draw from last week.
ING went on to say that “the mentality of U.S. producers has changed significantly from producing as much as possible to focusing on shareholder returns and continuing to demonstrate discipline when it comes to capital spending.” The more modest supply growth anticipated over the next year has also been influenced by problems with the supply chain, a lack of workers, and rising costs.
