Even if the fire is far from extinguished, the black gold burns a little less strongly. A barrel of Brent North Sea oil for May delivery closed below $100 on Tuesday for the first time since the second day of the invasion.Ukrainealmost three weeks ago, in a market concerned about an economic slowdown in China.
The reference price for this variety of oil fell 6.53%, to end at 99.91 dollars, while the barrel of American West Texas Intermediate (WTI) for delivery in April fell 6.37%, to 96.44 dollars.
Lockdown in China
“After falling more than 20% from last week’s highs, crude oil has entered bear market territory,” commented Fawad Razaqzada, analyst at ThinkMarkets. “It was China that had the biggest impact” on prices on Tuesday, argued Stephen Schork, analyst and author of the Schork Report. The decision to Beijing to order the confinement of tens of millions of people to contain outbreaks of Covid-19 “clearly raises concerns in the market about demand. »
China is indeed, and by far, the world’s largest importer of oil, with just over 10 million barrels per day. “The risk to Chinese demand is real,” said Louise Dickson, analyst at Rystad Energy, in a note, who spoke of a potential drop in consumption of half a million barrels per day linked to confinements.
The analyst nevertheless warns that if, in the short term, a slowdown in Chinese demand is likely to lower the price of black gold, it could, in the longer term, aggravate supply problems with new closures. factories and generate moreinflation.
Russia a key player in the market
Black gold prices also fell in response to hopes “that the talks between Russia and Ukraine could lead to a de-escalation”, according to Ricardo Evangelista, analyst at ActivTrades. A resolution of the conflict “could lead to less severe sanctions against Russia and ease supply pressures”. Russia is the second largest exporter of crude oil in the world.
Finally, another factor contributing to Tuesday’s drop: Russia assured that it had received a guarantee from Washington that the sanctions aimed at it because of Ukraine would not concern its cooperation with Tehran, seeming to remove an obstacle to the revival of the Iran nuclear deal. A positive outcome of the negotiations would lead to the lifting of sanctions against Iran, a founding member of the Organization of the Petroleum Exporting Countries (OPEC). A return of Iran to full export capacity could reverse the current state of the world’s black gold supply. In 2020, the country produced nearly 2 million barrels per day but only exported 404,500.