Oil prices recovered on Tuesday, after the sharp fall wiped the previous evening.
Weighed down on Monday by the effects on demand of the confinements ordered in China in the face of the rise in Covid-19 cases, while the question of an embargo on black gold and Russian gas remains unresolved, the barrel of Brent crossed the $100 threshold.
Around 7:40 a.m., the 159 liters of North Sea oil (Brent) for delivery in June, rebounded 2.04% to 100.49 dollars, after tumbling 4.18% to 98.48 dollars on Monday evening. In the space of a week, they fell by more than 6% and by 3.2% over one month, not without having taken off by more than half (+57.2%) year on year.
As for the barrel of American West Texas Intermediate (WTI) for delivery in May, it rose at the same time by 2.23% to 96.39 dollars, erasing the decline of 4.04% to 94.29 dollars posted the day before in evening.
“Prices faltered on Monday because of concerns around China and its confinements, coupled with uncertainties about Russia and its future ability to export oil”, if Europe is considering new sanctions, summarized Phil Flynn of Price Futures Group. Faced with the worst wave of Covid-19 in China since the start of the epidemic, Shanghai, the economic capital of the country, has been in total or partial confinement for two weeks now.
Reduced fears
“In other words, the lockdowns that are slowing oil demand in the world’s second-largest consumer nation are likely to last for a long time,” said Barbara Lambrecht, an analyst at Commerzbank. For Victoria Scholar, analyst at Interactive Investor, Beijing is limited to “its aggressive policy of zero tolerance (Covid) to the detriment of its economy”.
“There are fears that the lockdowns and economic restrictions will worsen if the cases spread to other cities,” she explains. The release of strategic reserves promised by oil-consuming countries “also helps to allay fears of” a shortage “and to fill part of the Russian supply missing from the market”, for her part said Fiona Cincotta, of City Index, interviewed by AFP.
Oil prices are likely to remain volatile in the near term given the situation in Ukraine, with analysts not definitively ruling out sanctions measures targeting Russian hydrocarbons, even if they are not on the immediate agenda . Still, a new series of measures is being prepared.
On the ground, Russian forces maintained their pressure on the strategic port city of Mariupol, which Ukrainian soldiers are desperately trying to defend, and in eastern Ukraine where kyiv expects a major offensive soon. The situation in Mariupol, besieged for more than 40 days by the Russian army and largely destroyed, is dramatic.
Slowdown in global growth
According to Ukrainian presidential adviser Mykhaylo Podolyak, ‘tens of thousands’ of people died there and ‘90% of the houses’ were destroyed, he wrote on Twitter, adding that ‘Ukrainian soldiers are surrounded and blocked’ . Ukrainian President Volodymyr Zelensky also called on Monday evening in a video address for more weapons from his allies, in particular to strengthen the defense of the city.
The United Kingdom has also announced that it is trying to verify information on the possible use of chemical weapons by Russian forces in Mariupol, after the Ukrainian regiment Azov claimed that a Russian drone had dropped a ‘ poisonous substance’ on soldiers and civilians. Petro Andryushchenko, an adviser to the mayor of Mariupol, stressed on Telegram that “information about the chemical attack is not currently confirmed”. So does Pentagon spokesman John Kirby.
Another bearish factor weighing on the black gold: ‘the possibility of a slowdown in global growth (…) could also weigh on the outlook for demand’, underlines Ms. Cincotta. ‘Rates are falling because the market fears expectations of a recession’, also indicated Phil Flynn while inflation is expected to be ‘extraordinarily high’ in March, warned the White House before its publication on Tuesday.
“There is increasing talk of an economic recession next year, with central banks clearly preferring a mild recession to runaway inflation,” according to Bjarne Schieldrop, an analyst at Seb.
/ ATS