China’s New COVID-19 Outbreaks Pushes Oil Prices Down
As investors fret about oil demand following Shanghai’s discovery of the first case of the virulent COVID-19 subtype, oil prices fell on Monday morning in Asia.
By 12:52 AM ET (4:52 AM GMT), Brent oil futures had decreased by 0.54 percent to $106.44, while WTI crude oil futures had increased by 0.87 percent to $103.88. Last week, both contracts had weekly drops as the market feared that more interest rate increases would trigger a recession and reduce oil demand.
Net long holdings in WTI oil futures are currently at their lowest point since March 2020, when demand fell after the first COVID-19 outbreak. This is despite persistent indicators of tightness, according to experts at ANZ Research. After Shanghai reported the first case of the very contagious BA.5 omicron sub-variant on Sunday, fears about probable lockdowns arose due to an increase in COVID-19 cases on July 10 in China from the previous day.
Is World’s Energy Market Controlled by Russia?
While Russian President Vladimir Putin warned that more penalties might have “catastrophic” repercussions on the world energy market, the market is keeping a watch on Western restrictions aimed at capping Russian oil prices. The Nord Stream 1 pipeline repair, which will take place from July 11 to July 21 and is the largest pipeline supplying Russian gas to Germany, is also being closely watched by the market. Markets are concerned that the strike may be prolonged due to the conflict in Ukraine.
Forget the COVID and Biden headlines; the key issue for markets right now is going to be whether Nord Stream restarts, according to Stephen Innes, managing partner of SPI Asset Management. If the pipeline is not restarted on July 22 as planned, there may be a destruction of the gas demand in Europe, which could lead to a slowdown in the economy and a decrease in the demand for oil, according to Innes.
Innes warned that they’ll remain in this circle of good and terrible in the oil market until they move clear of that large risk event.