Crude Oil Prices Under Pressure As Global Concerns Grow

crude oil

China’s economic fortunes are weighed by policy and disruptive restrictions. Crude oil made a 1-year low overnight before recovering and finishing higher for the session. The WTI futures contract dipped below US$ 74 bbl, while the Brent contract looked below US$ 82 bbl.

Increasing concerns about global growth undermined risk appetite to start the week. China’s continuing pursuit of its zero-case Covid-19 policy, which requires widespread lockdowns, is seen as impeding an economic recovery there.

The policy has led to protests across several major cities in China. The police cracked down to prevent further demonstrations on Monday night. It is being reported that authorities are checking citizens’ identification in and around the key protest sites.

The world’s second-largest economy is a huge importer of energy, and the impact of a slowdown there could weigh on crude prices.

Some speculation is that they may consider cutting production more than previously flagged. They have previously said that they plan to reduce output by 2 million barrels per day. The practical implementation of such an announcement might be difficult to achieve given that the cartel and its allies have been unable to meet their current quota targets.

The Asia-Pacific trading session has seen oil prices ease off again, perhaps on the back of several speakers from the Federal Reserve. This included James Bullard, John Williams, and Lael Brainard.

The main theme from those three board members was that the Fed had more work to do in their fight against inflation, inferring tighter monetary conditions going forward.

Thomas Barkin added to the hawkish chorus in an interview with Bloomberg following the New York close.

Some clues for the move lower might have been in some of the underlying supply and demand dynamics. Last week saw both the WTI and Brent futures markets dip into contango.

Contango occurs when the contract closest to settlement is cheaper than the contract that is settling after the first one. It highlights a willingness by the market to take delivery later rather than sooner.

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