Oil prices fell by more than 3% during trading today, Tuesday, July 12, 2022, with the increase in infections with the new Corona virus in China, the largest importer of crude in the world.
And the Covid-19 injuries in China supported fears of a global economic slowdown, which affected the outlook for fuel demand.
Oil Prices Today
The price of futures contracts for the benchmark Brent crude – for September delivery – decreased by 3.21%, recording $102.84 a barrel.
The price of West Texas Intermediate crude futures – August delivery – also decreased by 3.83%, to $ 99.56 a barrel, according to data seen by the specialized energy platform.
And oil prices ended their trading in a mixed situation, yesterday, Monday, as Brent crude turned marginally higher, while US crude closed lower, with continued fears of a decline in demand for oil, due to the possible closure in China due to the Corona virus.
“Rising fears of recession and continued slowdown in demand in China are driving down oil prices, although current supply and demand balances remain risky,” analysts from the consultancy Eurasia Group said in a note.
And many Chinese cities are adopting new restrictions to confront Covid-19, from business halts to closures, to curb new infections, with the emergence of a new highly contagious mutant in the country.
“While China may take a more targeted approach in trying to stem any outbreak, we will need to know how this works given the country’s no-coronavirus policy,” said Warren Patterson, head of commodity research at ING.
He added that the fundamentals were constructive given the tight supply situation, which was set to run for at least the rest of the year, explaining that this should limit the decline in prices.
Western sanctions imposed on Russia over the war in Ukraine, which Russia calls a “special military operation”, have disrupted trade flows of crude and fuel.
This comes as US Treasury Secretary Janet Yellen, during a tour of Asia, is looking at ways to strengthen sanctions, including setting a ceiling on Russian oil prices to reduce Moscow’s profits and help lower energy prices.
The Executive Director of the International Energy Agency, Fatih Birol, stressed that any ceiling for Russian oil prices must include refined products.
“I hope that the proposal, which is important to reduce the impact on economies around the world, will be accepted by many countries,” Birol said, on the sidelines of the Sydney Energy Forum.
Oil prices also fell as fears of a disruption of the Caspian Sea Pipeline Consortium subsided after a Russian court on Monday overturned an earlier ruling suspending operations in the pipeline for 30 days.
However, traders and analysts still fear that Russia will suspend the pipeline, which transports oil from Kazakhstan to the Black Sea, and the suspension could disrupt 1% of global crude supplies.
In addition, spare capacity in the Organization of the Petroleum Exporting Countries (OPEC) is declining, as most producers are pumping at full capacity.
White House National Security Adviser Jake Sullivan said on Monday that US President Joe Biden will raise the issue of increasing oil production from OPEC when he meets Gulf leaders in Saudi Arabia this week.
“There is little hope that Biden will visit Saudi Arabia, to launch more production from them or from the UAE,” said Jeffrey Haley, senior market analyst for Asia Pacific , adding that the price would likely be too high to make that happen.
A preliminary Reuters poll showed that stocks of crude oil and gasoline in the United States fell last week, while distillate stocks likely rose.