Oil prices falling despite reduction in production in Russia
2023.02.13 02:43
Oil prices falling despite reduction in production in Russia
By Ray Johnson
Budrigannews.com – Markets mostly ignored a cut in Russian supply as fears of a global economic slowdown and a sluggish Chinese recovery persisted, which led to a fall in oil prices on Monday. This was due to anticipation of economic cues from key U.S. inflation data that is due this week.
Last week, crude prices surged significantly, with the majority of the gains occurring on Friday when Russia announced that it would reduce supply by 500,000 barrels per day in response to Western price controls placed on its exports due to the Ukraine conflict.
On the other hand, analysts stated on Monday that the figure was largely priced in by the markets and that Russia was likely having trouble finding buyers for its oil due to the severe Western sanctions placed on its oil exports.
“Given that we were already assuming that Russia would have to reduce supply as a result of the EU ban on oil and refined products, these cuts do not change our view of the market. “The market coming to the realization that these cuts are already largely priced in is likely reflected in the weakness that we are seeing in prices in early morning trading today,” analysts at ING wrote in a note.
By 21:16 ET (02:16 GMT), futures had dropped 0.8% to $85.84 a barrel and 0.7% to $79.15 a barrel. Last week, both contracts gained more than 8%.
However, prices were impacted this week by uncertainty regarding a slowdown in the global economy, and traders are currently awaiting additional cues from U.S. inflation data due on Tuesday. Although it is anticipated that the reading will show that inflation eased further in January compared to the previous month, it is nonetheless anticipated to remain relatively high.
The Federal Reserve could increase interest rates in response to this pattern, which would slow economic expansion and decrease oil demand later this year.
In anticipation of the inflation reading, it increased, putting pressure on the crude market by raising the price of oil for international buyers.
Data released on Friday indicated that despite the recent relaxation of COVID restrictions, concerns about a Chinese economic recovery persisted.
With rising infections also disrupting activity, the country’s manufacturing sector is still struggling to recover from disruptions caused by COVID.
Still, crude demand is expected to reach all-time highs this year as China’s recovery continues. Markets, however, remain uncertain regarding the timing of such a recovery due to recent mixed economic readings.
