Oil Exhibits Mixed Performance Amid Tight Supplies

On Thursday, crude oil prices exhibited mixed performance as supply fears as well as geopolitical tensions in Europe got the upper hand over the economic data related fears across financial markets as inflation is soaring globally.

Trading has been thin and nobody knows what’s going to move the needle,” said John Kilduff, partner at Again Capital LLC in New York. Brent crude fell 6 cents to settle at $107.45 a barrel. WTI crude rose 42 cents, or 0.4%, to stabilize at $106.13.

Prolonged COVID-19 lockdowns in China, have also impacted the market. The slide in demand growth could not come at a better time, with China seemingly on the brink of locking down the capital of Beijing at any given moment.

EU ban on oil from Russia is still pending, as the key supplier of crude and fuels to the continent, is anticipated to further tighten global supplies. The EU is still discussing details of the Russian embargo, which needs unanimous support. However, voting towards a final embargo decision has been delayed as Hungary opposes the ban conceived of as disruptive to the Hungarian economy.

Oil prices and financial markets have been subject to pressure this week amid jitters over the pace adopted for interest rate hikes, the strongest US dollar in two decades in addition to concerns over inflation and envisaged recession.

Oil prices jumped after Russia decided to sanction 31 energy companies based in countries that imposed sanctions on Moscow following Ukraine’s conflict. That new Russian sanctions against key companies have created unease in the market at the same time that Russian natural gas flows to Europe via Ukraine fell by 25%. It was the first time that exports via Ukraine have been disrupted since the invasion.

US CPI data for the 12 successive months to April jumped 8.3%, powering concerns about bigger interest rate hikes in the future months, and their impact on economic growth.

Soaring fuel prices and slowing economic growth are expected to significantly curb the demand recovery through the remainder of the year and into 2023,” the International Energy Agency (IEA) said on Thursday in its monthly report. “Extended lockdowns across China are driving a significant slowdown in the world’s second largest oil consumer,” the agency added.

OPEC decided to cut its forecast for growth in world oil demand in 2022 for a second month on the back of the impact of Russia-Ukraine conflict, the Omicron coronavirus variant in China and rising inflation.