OPEC leaves demand forecast ‘under assessment’
Myra P. Saefong and Barbara Kollmeyer, MarketWatch
SAN FRANCISCO
EnergiesNet.com 03 15 2022
Oil futures tumbled below $100 a barrel on Tuesday to log their lowest settlement since the initial days of the Russian invasion of Ukraine nearly three weeks ago, officially entering a bear market with prices suffering a loss of more than 20% from their recent highs.
Price action
- West Texas Intermediate crude for April delivery CL.1, 0.66% CL00, 0.68% CLJ22, 0.68% fell $6.57, or 6.4%, to settle at $96.44 a barrel. The settlement was the lowest since Feb. 28, four days after Russia’s invasion of Ukraine.
- May Brent crude BRN00, 1.21% BRNK22, 1.24%, the global benchmark, fell $6.99, or 6.5% to end at $99.91 a barrel — the lowest since Feb. 25. Both WTI and Brent entered a bear market, down more than 20% from their March 8 settlements, which were the highest since 2008, according to Dow Jones Market Data.
- April natural gas NGJ22, 2.69% fell 1.9% to $4.568 per million British thermal units.
- April gasoline RBJ22, 1.27% dropped 5.4% to $2.998 a gallon
- April heating HOJ22, 2.23% fell 7.5% to $3.03 a gallon.
Market drivers
China’s widespread lockdowns are spooking the market, “given its resulting impact on energy demand — as well as the uncertainty it brings about further lockdowns,” Matt Smith, lead oil analyst, Americas, at Kpler told MarketWatch.
China’s southeastern manufacturing hub of Shenzhen, near Hong Kong, has been locked down due to a COVID outbreak, in addition to a COVID lockdown in the northeast of the country.
Negotiations between Ukraine and Russia also continued after no breakthrough was reached on Monday, as Russian forces continued to pound Ukraine. Apart from the humanitarian catastrophe, the conflict has sparked concerns over global economic growth and sent commodities prices surging across the board.
In a monthly report Tuesday, the Organization of the Petroleum Exporting Countries said it was leaving its economic forecasts and its estimates of 2022 crude-oil demand and supply growth “under assessment” as it warned that inflation stoked by the Russia-Ukraine war could undercut oil consumption.
Oil prices slid Monday on reports the U.S. could lift sanctions on Venezuelan oil which could ease some supply worries as the war between Ukraine and Russia stretches to a third week.
The market may be “looking to Russian energy flows and thinking that we may not see as big a supply dent due to self-sanctioning as originally expected,” said Smith. “Export loadings of Russian crude and products are continuing as normal, but it is a matter of time before we see the result of halted buying given the lag involved.”
“Regardless of the reason for the recent sell-off, the move lower looks overdone, and prices should rebound as the lack of Russian energy purchases in recent weeks manifests itself in lower seaborne flows,” said Smith.
Meanwhile, data showed hedge-fund managers “slashed net-bullish Brent oil bets to their lowest levels on record,” noted Naeem Aslam, chief market analyst at AvaTrade. “The retreat demonstrates that significant swings in the oil market were part of a broad-based liquidation of positions, with speculators closing out long contracts in WTI, diesel, and gasoline futures.”
“According to ICE, the fall in Brent was fueled by the largest drop in outright bullish bets since 2018,” he said.
marketwatch.com 03 15 2033
