Oil Prices Decline Amidst Demand Uncertainties
Oil prices fell on Monday over market cautiousness ahead of industry data by two major energy watchdogs, the Organization of Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) as well as fears of post-pandemic Chinese economic rebound.
West Texas Intermediate crude for February delivery was last seen down US$1.01 to US$78.85 per barrel, while March Brent crude, the global benchmark, was down US$1.08 to US$84.20. Crude oil prices decreased as trading has been on hold amid upcoming industry data on demand and supply.
Market data shows prices rose more than 8% last week, as investors expect China demand to rise as the country reopens as moves away from the zero-Covid policies that cut into growth while slowing US inflation eased concerns that rising interest rates will push its economy into recession.
The OPEC and IEA will publish their monthly oil market reports on Tuesday and Wednesday respectively, which cover major issues affecting the world oil market and provide an outlook for demand and supply in the crude oil market.
The markets are also highly concerned that the rising COVID-19 cases in China, the largest oil importer in the world, may impede the country’s economic recovery. Fears that weak oil demand in the country will postpone the economic recovery are pushing prices lower.
After the restrictions were relaxed at the beginning of earlier last month, the Beijing government stopped reporting the number of cases, but health officials in several cities in China are stating that the majority of the population is fighting the disease.
Amid reports that the government is hiding the real number of cases, the experts warn that 70% of the 1.4 billion people in the country may contract the disease throughout the winter if the mass spread keeps going at this speed.
Meanwhile, China’s road traffic levels are continuing to rebound from record low levels following the easing of COVID-19 restrictions. A congestion index comprising the 15 cities with the most vehicle registrations has risen by 31.3% versus a week earlier.
“Higher import quotas by China saw oil demand pick up in the physical market. The sentiment was also bolstered by expectations of the Federal Reserve slowing its interest rate hikes, following lower than expected inflation,” Saxo Bank noted. # Oil Prices Decline Amidst Demand Uncertainties
