- The demand and supply limitations have pushed prices higher.
- We are stuck in a range, and we’re looking for a breakout.
- China’s intentions to change its disastrous zero Covid policy.
After all, the prospect that the European Union will not impose prohibitions on Russian oil caused oil trading on Monday to be little changed from the previous week’s end – despite the fact that the demand and supply limitations that have pushed prices higher in recent weeks are still present as reported by Ship & Bunker.
Propelling crude prices
After people with knowledge of the matter told media that the government of Hungary is signalling that any progress on the EU talks will likely slip to next month at the earliest, West Texas Intermediate settled up 1 cent, or 0.01%, at $110.29 per barrel, while Brent settled up 87 cents, or 0.7%, at $113.42.
Also, Saudi Arabia over the weekend undermined U.S.-led efforts to punish Moscow for its invasion of Ukraine by signalling it will continue to support Russia’s role in the Organization of the Petroleum Exporting Countries (OPEC).
Bob Yawger, director of the futures division at Mizuho Securities USA, remarked, “We are stuck in a range from $105-$116 and we’re looking for a breakout,” and he added that a European embargo on Russia would likely propel crude prices to all-time highs.
Robert Habeck, Germany’s economy minister, added, “I expect what will happen, as is always the case in Europe, is that some countries will effectively get special rights.”
Global economy
For the record, Europe’s existing bans are having little to no impact other than stoking traders’ fears and helping along with price increases: according to vessel-tracking data and port agent reports released Monday, seaborne crude shipments from Russia edged lower in the seven days to May 20 but showed little clear impact from the EU restrictions that came into effect on May 15.
The average seaborne crude flows were 3.44 million barrels per day (BPD), down just 3% from 3.55 million barrels in the week ended May 13.
Many analysts, on the other hand, questioned the global economy’s health: At the annual Davos economic summit, Kristalina Georgieva, managing director of the International Monetary Fund, said she did not expect a recession in big nations but could not rule it out.
China’s intentions
Oil’s health remains optimistic, with the gap between WTI’s two closest December contracts (for this year and in 2023) at $13 per barrel, up from around $11 per barrel a month ago.
In other oil-related news on Monday, the market applauded China’s intentions to change its disastrous zero Covid policy, whose most recent lockdowns have wreaked havoc on major cities; under the current policy, Beijing reported 99 new cases on May 22 (out of a total population of 21.5 million people), making it unlikely that the lockdowns will be eased; however, the market is sceptical that the lockdowns will be eased.
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Source: Ship & Bunker
