Oil Prices Drop as The Dollar Strengthens
Oil fell on Thursday after gaining more than $3 in the previous session. A stronger dollar suppressed oil demand. Moreover, concerns about a shaky global economic outlook overshadowed the sentiment.
Brent crude experienced a 91 cents, or 1% fall, to $88.41 by 0629 GMT. Meanwhile, U.S. crude futures dropped 80 cents, or 1%, to $81.33.
Both indices recovered from the past two sessions after falling to nine-month lows earlier this week. A brief drop in the dollar index and a larger-than-expected drop in U.S. fuel inventories fueled optimism about a rebound in consumer demand.
On Tuesday, Goldman Sachs lowered its 2023 oil price projection, citing weaker demand and a higher U.S. dollar, but said global supply shortfalls strengthened its long-term optimistic outlook.
Travel for the upcoming week-long national holiday in China, the world’s largest crude oil importer, should be its lowest in years. Beijing’s ongoing zero-COVID restrictions encourage people to stay home, and economic worries decrease spending.
Citi economists have reduced their China GDP prediction for the fourth quarter of 2022 from 5% year-on-year growth to 4.6%.
Oil and Coal Sectors
If the oil and coal sectors can agree on anything, additional fossil fuels are the answer to the current global energy crisis.
The Asia Pacific Petroleum Conference and Coaltrans Asia met in person for the first time since 2019. They provided forums for the industry to analyze the current situation of regional and global energy and map what they view as the route forward.
People in the industry will “talk their book” and promote what is in their best interests. However, the two meetings revealed a growing divide between the fossil fuel sectors and other global energy stakeholders such as policymakers, investors, bankers, and utilities.
The Russian invasion of Ukraine on February 24 has prompted actors in the global energy market to reconsider their priorities. The challenge for the oil, gas, and coal industries is chronic underinvestment in new oil and gas fields and mines.
The solution to the current fossil fuel dilemma is more fossil fuels, but only from more trustworthy countries rather than Russia.
The growing likelihood that Russian pipeline natural gas, coal, and much of its crude oil and refined products will be lost to Europe emphasizes the need to increase supply from other nations, according to the oil and coal industries.
There is a sense of realism that, for the time being, Europe and many Asian countries continue to rely on fossil fuels and have no choice but to pay the current high prices to secure supplies, particularly as the northern winter approaches.
Moreover, there is also a recognition that the energy shift cannot complete quickly enough to eliminate dependency on petroleum, natural gas, and coal for several years.
There is also an acknowledgment that shifting heating and light transportation to electricity-based solutions does not signal the end of oil and gas, which will still be required for heavy transportation, petrochemicals, and critical items like fertilizers.
Russia’s Gas Pipelines Now Have Four Leaks
According to the Swedish Coast Guard’s Command Center, there is a new leak on the Nord Stream 1 and 2 gas pipelines in the Baltic Sea, increasing the total number of leaks to four.
Since early this week, gas has begun rising from the pipelines, with Denmark expecting the links to be empty by Sunday. Several governments have labeled the attacks “deliberate” and “sabotage,” Finland said on Wednesday that only a state actor could be capable of such large-scale acts.