Prompted by Chinese decisions related to easing health closures to counter the spread of the Corona virus, and renewed efforts by European Union leaders to reach an agreement banning most Russian oil imports into the European Union, crude oil prices reached, on Monday, their highest levels in two months.
The possibility of high demand for oil in China and a shortage of supplies from Russia pushed Brent crude prices, the benchmark, to rise by 1.2%, and the price of crude reached, on Monday evening, 117.70.
These prices are still lower than the peak of $ 127.8 that the oil price reached on the eighth of last March.
Since March, lower fuel consumption in China has tamed global demand and lowered crude oil prices from their highest levels.
newspaper said The Wall Street Journal The European Union is “confident” that it has reached a consensus on sanctions against Russia, according to statements by German Olaf Scholz as he headed to the EU summit in Brussels.
Leaders of European Union member states are due to meet on Monday and Tuesday, after diplomats over the weekend failed to reach an agreement on sanctions that would limit Russian oil imports.
After adjustments aimed at winning the approval of Hungary, which buys most of its crude by pipeline from Russia and opposes a total oil embargo, plans now focus on halting ship-borne oil imports.
The sanctions, as I proposed at Monday’s summit, would allow Russian oil to continue flowing to Europe via pipelines.
An EU embargo on Russian oil would increase pressure on global supplies.
Even with the exemption from pipeline imports, the embargo deals a severe blow to Russia’s ability to benefit from its oil exports.
As of 2020, about three-quarters of the 2.8 million barrels of crude oil that Russia exports arrive in Europe every day by ship.
The newspaper quoted Paul Horsnell, head of commodity research at Standard Chartered Group, that the Covid-19 closures reduced Chinese demand for oil by about 1.2 million barrels per day in May, and Horsnell added that with the closures approaching the decline, most of that is likely to return. Demand, which raises Chinese consumption to nearly 16 million barrels per day.
Shanghai Vice Mayor Wu Qing said over the weekend that authorities would relax the conditions under which companies can resume work this week.
slowing down of the Chinese economy
The sharp slowdown in the Chinese economy during a year of acute political sensitivity for Chinese leader Xi Jinping is testing the credibility of Beijing’s official economic data.
Figures released this month showed the economy contracted in April as lockdowns shuttered stores and factories, decimated logistics networks and kept millions of people trapped in their homes for weeks. This bleak picture is largely in line with signals from business surveys, corporate earnings, and a range of unofficial data sources that have previously indicated a significant slowdown.
Last week, Premier Li Keqiang warned that the economy faces a tougher test in some ways than it did in 2020.
In a conference call, he urged national and regional officials to do more to support businesses, protect jobs and ensure the economy grows in the second quarter, according to state media.
Later this year, Xi will seek to overturn recent precedents and secure a third term in power, a move that would have been easier had it not been for the current economic data, according to him. The Wall Street Journal.
Economists say the depth of the economic slowdown leaves Beijing with few options, either to accept a growth rate much slower than the government’s target of around 5.5% for 2022, or to change or scrap that target, or to play around with the numbers.
“The problem of fraud in statistical data is still relatively prominent,” China’s top watchdog said in March, saying that some officials tend to boost their careers by fabricating or inflating data to paint a more optimistic picture of growth and development in areas under their control.
Hundreds of state and corporate officials have been punished in recent years for violating statistics laws.
Both official and unofficial data show that growth in China is collapsing.
The shutdowns have crippled factories in China’s industrial heartlands and brought major cities like Shanghai to a standstill. With the real estate sector plunging and external demand for its exports fading, most economists believe that this means that China’s economy is currently on the cusp of growth, if not an outright contraction.
Height effects
Higher oil prices threaten to fuel inflation in the US and elsewhere, keeping pressure on central banks to raise interest rates.
Gasoline and diesel prices have risen to record levels in recent weeks in the United States, as motorists prepare for the summer driving season.
Average US gas prices are at an all-time high of $4,619 a gallon, according to the AAA Automobile Club, up from $3,045 a year ago.
Inflation figures published in Europe on Monday showed consumer price growth in Germany accelerating to its fastest pace since 1973 this month. This was partially supported by a 38% rise in energy prices.
In Spain, consumer prices rose 8.5% year-on-year, up from the 8.3% rate recorded in April.
Michael Mitkal, head of macroeconomic strategy at State Street Global Markets, told the newspaper The Wall Street JournalInflation remains high in both Europe and the United States, which maintains pressure on central banks to raise interest rates, adding, “There is nothing we see in the current inflation trend that gives us any confidence.”
In contrast to the market pattern accompanying the rise in oil, global markets have been boosted by the looming easing of some Covid-19 restrictions in China.
The Standard & Poor’s 500 index snapped a seven-week losing streak on Friday and posted its biggest weekly gain since November.
S&P 500 futures were up 0.6% by noon ET.
Government bond yields tumbled from their 2022 highs in the run-up to Friday’s close, helping lift stocks after a weeks-long slump.
The Wall Street Journal says that some money managers are warning that a rise in stock and bond prices could be a short-term hit in a long-term downturn.
They say most of the factors that contributed to this year’s losses, such as the war in Ukraine, high interest rates set by the Federal Reserve and a slowing economy, remain.
And China’s exit from the closures would increase demand for oil at a time when supplies of some fuels are running out globally.
The city government has also drawn up a 50-point plan to speed up the economic recovery, and measures include tax cuts for businesses and subsidies for the purchase of electric vehicles.
In the exporting countries, this rise may be “good news”.
The oil prices of Iran and Algeria rose by 0.53 percent to 114.6 for Iranian heavy oil and 121.5 for the light desert oil, and the price of a barrel of Saudi (Arab light) oil reached 116.3, an increase of 2.12 percent, and Kuwait’s oil was 121 dollars, an increase of 2.79 percent, according to the website. Oil Price.
Iran’s heavy oil rose to 114.6 dollars a barrel, and Algeria’s (Sahara Light) to 121.5
Emirati oil rose by nearly 3.03%, and Qatar’s oil rose by 2.4% in total.
Iraqi oil “Basra heavy” rose to 109 dollars a barrel.
The high oil prices, amid the increasing demand for production in the world, means more income for the central banks of the exporting countries.
The war in Ukraine
The oil prices of Russia, Espoo, rose by two and a half dollars per barrel, to reach the price of 80.89, and Sokol increased by 1.8 dollars, to reach the price of 105.38 dollars.
But the gains that Russia will achieve from the rise in oil, which amounts to more than two dollars per barrel, or about twenty million dollars per day, will be severely affected if the European Union imposes an embargo on Russian oil.
Russia’s losses from stopping Europe from receiving its oil carried by ships may reach more than 160 million dollars per day.
The Kremlin desperately needs this money to fund its war machine in Ukraine, which is the meaning of the latest European embargo project, which aimed to make Russia’s invasion of Ukraine “more painful for Moscow.”