- Oil loses ground as the market values weak demand from China.
- Russian threats to stop oil exports lend some support.
West Texas Intermediate Crude is under pressure midweek, shedding about 5% in New York midday trade and taking out key support territory as the greenback rises to a 20-year high as the market prices in weak demand from China.
Headlines are dominated by Covid-19 lockdowns in China, the world’s top net importer, and concerns about movement restrictions already affecting 46 cities. As many as 65 million people across the country are now subject to mobility restrictions and the dent in demand is expected to spread quickly across international markets, which are already grappling with fears that the global economy is headed for a recession. .
The rise in infectious strains of the virus raises fears that authorities may be forced to lockdown areas more frequently as China persists in its “contagion-zero” strategy,” analysts at ANZ bank said.
However, Russian threats to halt oil exports should the G-7 and EU plan to cap Russian oil prices go ahead provided some support for oil. However, the decision made this week by OPEC+ to reduce production quotas by 100,000 barrels per day has also been taken into account.
Analysts at TD Securities note that this indicates that this group of swing producers will be increasingly active in their decision-making, as they eye the downturn barrel. ”In turn, energy supply risks should also be reinforced by the reactivation of OPEC+. The tail to the right in energy markets is getting fatter,” the analysts argued.
Meanwhile, the Energy Information Administration (EIA) slightly raised its global oil demand forecast for 2022 on Wednesday, while also cutting its production estimate for this year.
Technical levels
Source: Fx Street
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