🐂 Not all bull runs are created equal. November’s AI picks include 5 stocks up +20% eachUnlock Stocks

Crude oil lower; Demand concerns mount as China's COVID cases rise

Published 21/11/2022, 15:20
© Reuters.
LCO
-
CL
-

By Peter Nurse   

Investing.com -- Oil prices fell Monday as China reported a tightening of COVID restrictions as cases rose, raising fears of reduced demand at the world's largest crude importer as economic activity is impacted.

By 09:05 ET (14:05 GMT), U.S. crude futures traded 1% lower at $79.33 a barrel, while the Brent contract fell 0.9% to $86.80, falling to near two-month lows.

Both benchmarks closed Friday at their lowest since Sept. 27, with U.S. crude down 10% and Brent 9% lower.

China reported its first deaths from COVID-19 in several months, including three in Beijing, while nationwide case numbers surged past their April highs with outbreaks in both Beijing and Shanghai, where localized lockdowns were once again in force.

China’s domestic demand is likely to fall sharply if the current wave of COVID outbreaks forces a return to more restrictive mobility measures.

Influential investment bank Goldman Sachs has responded to this upsurge in cases by cutting its fourth-quarter forecast for Brent crude by $10 a barrel to $100, the second forecast cut since September.

Also weighing on the crude market Monday was the rise in the U.S. dollar, which makes the commodity, which is denominated in dollars, more expensive for foreign buyers.

The U.S. Dollar Index, which tracks the greenback against a basket of six other currencies, climbed Monday to its highest level since Nov. 11.

This selloff has resulted in speculators reducing their net-long positions over the last reporting week, with the ICE Brent net-long falling by almost 30,000 lots and the NYMEX WTI by just over 20,000 lots.

“This move was largely driven by longs liquidating, rather than fresh shorts,” said analysts at ING, in a note.

As far as the supply situation is concerned, the looming European Union ban on Russian seaborne flows and Group of Seven price-cap plan are clouding the outlook, amid reports that European buyers have reportedly been stockpiling ahead of Dec. 5, when the ban is due to take effect.

“We could get more clarity on the G-7 price cap for Russian oil on Wednesday, including the level at which the group intends to set the cap,” ING added. 

EU energy ministers are also scheduled to meet on Thursday to try to move closer towards an agreement on their latest energy measures for the region.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2024 - Fusion Media Limited. All Rights Reserved.