Oil Tumbles on Fresh COVID Variant in China
Crude oil prices ended the week lower and continued falling early Monday as recessionary fears in the United States (U.S) dominated investor sentiment yet again, Australia’s ANZ Bank said in a Monday note.
Uncertainties in the global economies continue to impact the demand and even supply of hydrocarbon. Russia is withholding gas supply to European countries, causing pressure on Germany. There is a fresh covid-19 pressure in China, keeping demand outlook lower.
In the United States, there is fear that the economy will move into red zone as gross domestic products slow down with relatively high inflation fear that keeps the price level higher.
In 2022, the energy crisis across the world has lifted inflation rates higher and it is unlikely that the pressure will recede in the year as a result of the pass-through effect of the Russia-Ukraine war.
Despite a fundamentally tight physical market, investors continue to reduce their bullish bets as restrictive monetary policy raises the risk of slower economic growth, ANZ Bank said. READ: Oil Rises as China Moves to Unlock Shanghai
Net long positions in WTI crude futures are now at their lowest level since March 2020, at the start of the pandemic, but the US crude prompt time spread has surged to $4/b, its highest level since March, the bank noted.
Brent crude at last look lost 2.3% to $104.59 per barrel while West Texas Intermediate crude fell 2.5% to $102.20 early Monday, following news that Shanghai is carrying out new mass COVID-19 testing, which markets fear will hit demand, according to reports.
Over the weekend, Shanghai reportedly discovered a new sub-variant and recorded the highest number of daily new cases in Shanghai since May, according to a Reuters report.
However, Saudi Arabia raised its selling prices of light crude to most regions for August amid strong demand and US exports remain strong, with the four-week average just above 3 million b/d. # Oil Tumbles on Fresh COVID Variant in China
