Oil prices fall 5% in week as COVID-19 concerns surface again in China
Global crude markets have rallied since Russia’s invasion of Ukraine on February 24, with Brent and US futures trading above $100 for that period, but benchmark crude prices fell in the latest trading week.
The bias is still upward sloping over supply disruptions due to Western sanctions on Russia for its attack on Ukraine.
Global crude oil futures fell in the latest trading week on concerns over demand driven by a fresh surge in COVID-19 cases in China and tighter restrictions imposed there.
International benchmark Brent crude fell 1.5 per cent to around $107 a barrel on Friday. For the week, Brent dropped 4.5 percent after rising nearly 9 percent last week and down nearly 13 percent in the two prior weeks.
If this weak trend continues, April will be the first month of the year in the negative for Brent.
US crude benchmark West Texas Intermediate, or WTI, also ended 1.5 per cent lower at around $103 a barrel. Like Brent, WTI also showed a decline of 4.5 per cent for the week and volatility similar to global benchmarks over the past three weeks.
While demand concerns from China, one of the world’s biggest oil consumer, have weighed on investor sentiment, the path of least resistance for crude is up, driven by the prospect of more sanctions on Moscow as the Ukraine crisis and has accelerated.
“The risk is certainly more upward sloping given the war in Ukraine and potential sanctions on Russian exports, but the risk of a lockdown and Fed-driven economic slowdown in China is also significant,” said Craig Erlam, head of research for Europe on online trading platform OANDA told ANI.
The dollar’s rally in recent weeks has also impacted oil prices, led by an aggressive approach by policymakers at the Federal Reserve to fight inflation at a more significant and faster pace.
A Fed policymaker also suggested a 75 basis point hike in the May meeting after the central bank raised rates by 25 basis points in its last meeting.
“Some fear the 50 basis point increase will be the first of many and could slow the economy and oil demand,” Phil Flynn, energy analyst at Price Futures Group in Chicago, wrote in a commentary note.
It is not only a tight cycle troubling traders overnight, but also the pricing of a 50-basis point interest rate hike by the European Central Bank until September. The Bank of Japan, on the other hand, wants to remain calm, but is concerned that the US and Europe’s stance may force them to change their course.”