Crude oil prices continued this week’s fall on Wednesday, with trade flows headlined by the Russia-Ukraine war, a surge in supply and a slump in demand from China over COVID-19 cases.
Rising US crude stockpiles, and Shanghai’s extended lockdown fueled fears of slowing demand, after falling nearly 1 per cent on a stronger dollar in the previous session; Benchmark Brent crude was last up 25 cents at $106.90 a barrel.
US West Texas Intermediate futures were flat near $102 a barrel. Market sources cited data from the American Petroleum Institute on Tuesday as US crude contracts fell 1 per cent on Tuesday, and distilled stocks rose last week, while gasoline inventories declined.
Crude oil came under pressure as the EU again decided to avoid any direct restrictions on Russia’s crude or natural gas exports. The API report also weighs in on the price, which saw an unexpected rise in US crude stocks. Rising virus cases in China are also putting pressure on prices, said Ravindra Rao, vice president and head of commodity research at Kotak Securities. However, support prices are supply risks and tight US and global stocks.
“Crude may moderate to negative ahead of inventory report, however, supply risk may lay a floor for prices,” he added.
On Tuesday, the dollar rose to its highest level in nearly two years, fueled by snarky comments from Federal Reserve officials who pushed for a quick reduction in the central bank’s bloated balance sheet.
A stronger dollar makes oil more expensive for holders of other currencies, so international oil prices move in the opposite direction of the greenback trend.
Demand concerns also mounted after officials in top oil importer China imposed a lockdown in Shanghai to cover all 26 million people in the financial hub.
Wild gyrations were expected to be the norm, driven primarily by news flows from the Russia-Ukraine conflict.
“We expect volatility in crude oil prices to remain negative in today’s session,” said Rahul Kalantri, Vice President, Commodities, Mehta Equities.