Oil prices fell 5% this week as COVID-19 concerns resurface in China
Global crude oil markets have been in turmoil since Russia invaded Ukraine on Feb. 24, with Brent and US futures trading above $100 for most of that period, but prices of the crude oil benchmark fell in the last trading week.
The bias has still tilted to the positive side on supply disruptions over Western sanctions against Russia for its attack on Ukraine.
Global crude oil futures fell in the last trading week on demand concerns, driven by the renewed increase in COVID-19 cases in China and the following strict restriction imposed there.
The international benchmark, Brent oil, fell more than 1.5 percent to about $107 a barrel on Friday. For the week, Brent was down 4.5 percent after gaining nearly 9 percent last week and down about 13 percent in the previous two weeks.
If that weakening trend continues, April will be Brent’s first negative month this year.
The US benchmark for crude oil West Texas Intermediate, or WTI, also closed more than 1.5 percent lower at nearly $103 a barrel. Like Brent, WTI also posted a 4.5 percent decline for the week and similar volatility to the global benchmark in the previous three weeks.
While demand concerns from one of the world’s largest oil consumers, China, weighed on investor sentiment, the path of least resistance for crude is up, driven by the prospect of more sanctions against Moscow as the crisis in Ukraine further intensified.
“The risks are certainly more upside, given the war in Ukraine and a possible embargo on Russian exports, but the lockdowns in China and the risk of a Fed-driven economic slowdown are also significant,” said Craig Erlam, head research from Europe on online trading platform OANDA, ANI told.
The dollar’s gains in recent weeks have also weighed on oil prices, fueled by the aggressive stance of Federal Reserve policymakers for more significant and faster rate hikes to combat runaway inflation.
A Fed policymaker even proposed a 75 basis point hike at its May meeting, after the central bank raised interest rates by 25 basis points at its previous meeting.
“Some fear that a 50 basis point rate hike will be the first of many and could slow the economy and oil demand,” Phil Flynn, an energy analyst with Price Futures Group in Chicago, said in a comment.
It’s not just a tightening cycle that upsets traders overnight, but also the pricing of a 50 basis point rate hike by September by the European Central Bank. The Bank of Japan, on the other hand, wants to remain moderate but is concerned that the US and European stance could force them to change course,” he added.
