Oil prices rallied as heightened concerns over gas flows to Europe after Gazprom invoked “force majeure” and a weaker dollar offset fears of crude demand due to a looming recession and lockdown in China.
In particular, the September delivery contract of Brent performs a jump 4.77% and trades in 106 dollars the barrel having added $4.84 to today’s price.
Similarly, US August WTI crude is up 4.38% moving to $101.87 the barrel, with its price rising by $4.32 today.
Crude prices had already moved higher in the morning, with buyers taking the lead amid a weaker dollar, but they sharply extended their gains after it was reported that Russian energy giant Gazprom had invoked “force majeure” over reduced natural gas flows. gas to Europe.
Specifically, as it states in letters to at least three of its clients – one of which is the operator in Germany Uniper – Gazprom cannot fulfill its logistics obligations due to “extraordinary” circumstances beyond its control.
“Brent crude will find support if Russia does not restore flows to Germany after Nord Stream 1 maintenance,” notes OANDA senior analyst Jeffrey Haley.
A CNBC source says Gazprom’s letters concern supplies through the Nord Stream 1 pipeline, a major supply route to and from Germany.
“At the moment, it is not clear whether natural gas exports to Germany will resume,” said ABN Amro senior economist Hans van Cleef.
“With European leaders determined to tighten sanctions on the Kremlin, there is an increased likelihood that the Russian government will announce its next step, to further cut gas flows to Europe in response,” he adds.
At the same time, as mentioned above, the US dollar retreated today from its multi-year highs, providing support for commodity prices in general, from gold to oil.
A weaker dollar makes dollar goods more affordable for holders of other currencies.
On Friday both Brent and WTI posted their biggest weekly declines in about a month, amid concerns about an impending recession that will hit energy demand.
At the same time, mass coronavirus testing continues in various parts of China, raising concerns about oil demand in the world’s second-largest consumer.
However, crude supply remains tight, supporting prices. As expected, Biden’s trip to Saudi Arabia failed to bring any commitment from OPEC’s top producer to increase oil production.
Biden wants Gulf producers to ramp up production to help lower oil prices and lower inflation.
“Although there are no immediate commitments to increase oil production, the US has reportedly indicated an expected gradual increase in supply,” said an analyst at the National Australian Bank.
In any case, the upcoming OPEC+ meeting on August 3 will focus the market’s attention as the current production deal expires in September.
Source: Capital
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