Rising coronavirus cases in China and looming US inflation data are raising concerns about crude demand.
Via Bloomberg
Published on July 12, 2022
Oil fell as fears of a global recession and growing Covid-19 cases in China dampened traders’ risk appetite.
West Texas Intermediate fell more than 8% to $96 a barrel for the first time since early April. Virus cases are on the rise in China and looming US inflation data is stoking demand concerns. Meanwhile, reduced liquidity is also exacerbating the price move. Money managers have become more bearish on major oil benchmarks, cutting their long positions last week to their lowest levels since 2020.
“The volatility in the commodities market raises the stakes for investing money in operations,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Management. “The drop in prices in other commodities has also dampened risk appetite for crude even in a supply-constrained market.”
Despite fears of an economic slowdown, some energy regulators agree that the supply squeeze will get worse. IEA Executive Director Fatih Birol said countries “may not have seen the worst” of the global energy crisis while OPEC’s first look at 2023 did not show a reversal. relieve market stress. Constrained by supply, the US has lowered its forecast for oil production growth through 2023, citing inflation and labor shortages.
Crude oil has fallen since early June on concerns that an escalation in the United States could be pushed into a recession as central banks raise interest rates to combat inflation. However, the physical market continues to show strong signs. The premium on North Sea oil has been bid at the highest level since at least 2008. The oil futures curve also continues to recede, with short-term contracts more expensive than futures contracts. after.
Price
- WTI prices for August delivery fell $8.25 to $95.84 per barrel in New York.
- Brent crude for September delivery fell $7.61 to $99.49 a barrel.
President Joe Biden is scheduled to visit Saudi Arabia this week on a tour of the Middle East as he seeks to tame high energy prices that have roiled the global economy.
The US believes OPEC has the ability to increase production if Biden’s upcoming visit to the region yields any deal. The French president will meet with UAE leaders next week to discuss oil supplies.
–With support from Alex Longley.
