Crude oil prices are about to book a week of sizeable losses, during which market movements erased all gains Brent and West Texas Intermediate had made since the start of the year.
According to Bloomberg, the cumulative weekly loss for the benchmarks could reach 10 percent if today’s trade is in line with what we’ve seen so far this week, as demand concerns trumped the news of China reopening after massive Covid restrictions.
At the same time, even though the price cap on Russian oil that G7 put into effect on December 5 was theoretically bullish for oil, traders figured out it was unlikely to have any immediate effect on physical oil supply and instead of buying began selling their positions.
This could yet change once the dust from the cap’s implementation settles and the potential for supply disruption unfolds.
For now, there have only been hints: Turkey’s new proof-of-insurance rules are one such hint, which has got some 20 million barrels of Kazakh crude stuck in the Turkish straits. At the same time, traders are sounding the alarm over confusion in the physical oil market where cargos have never been traded at fixed, unchangeable prices.
Meanwhile, however, fears of a looming global recession fuel a bearish mood among traders, and this is getting reflected in prices.
“Oil has been dragged lower by broader recession fears that accompany global monetary policy tightening,” Vishnu Varathan, the head of Asia economics and strategy at Mizuho Bank, told Bloomberg. “And given the lags in monetary policy, a ‘wall of tightening’ may hit the global economy yet.”
The bearish factors are s strong right now that even the news of the Keystone pipeline spill and consequent shutdown did not have any substantial effect on oil prices.
"I would tend to think that, any minute here, you're going to see a headline hit the tape that's going to say that Keystone is going to be back sooner rather than later," Bob Yawger, director of energy futures at Mizuho, told Reuters.
By Irina Slav for Oilprice.com