The oil price withdraws in the face of supply and demand pressure

A worker collects a crude oil sample at an oil well operated by Venezuela’s state oil company PDVSA in Morichal, Venezuela, July 28, 2011. REUTERS / Carlos Garcia Rawlins

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  • Japan signaled that it could free up oil reserves
  • Europe is fighting the fourth wave of coronavirus infections
  • The US dollar traded close to a 16-month high

LONDON, November 22 (Reuters) – Oil prices fell on Monday as rising covid-19 levels in Europe and a potential release of Japanese oil reserves raised concerns about both oversupply and weak demand.

Brent oil was down 56 cents, or 0.7%, to $ 78.33 a barrel at 1157 GMT and US West Texas Intermediate (WTI) oil fell 54 cents, or 0.7%, to $ 75.40.

The prospect of national shutdowns in Europe has raised concerns about economic growth and growth in oil demand, said Tamas Varga, an oil analyst at London brokerage PVM Oil Associates.

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Investors sought safe havens such as the dollar early in the session, which contributed to the sharp drop in oil prices, Varga added.

Tens of thousands of people, many of them right-wing extremist supporters, protested in Vienna on Saturday after the Austrian government announced a new shutdown. Germany could also introduce new curbs, with politicians discussing a lockdown for unvaccinated people. read more

The US dollar traded close to a 16-month high against the euro on Monday, making the dollar price of crude oil more expensive for buyers of other currencies. read more

Meanwhile, the prospect of releasing oil from strategic petroleum reserves (SPR) maintained price pressure on oil and kept Brent below the psychologically important $ 80 limit.

Japanese Prime Minister Fumio Kishida signaled on Saturday that he was ready to help with efforts to combat sky-high oil prices following a request from the United States to release oil from emergency storage. read more

“Gas prices are almost $ 4 per gallon, and that’s when politicians in the United States get very nervous,” said Fereidun Fesharaki, chairman of the consulting firm Facts Global Energy.

But any SPR release will only have a brief impact for two or three weeks before everything goes back to where it was, he added.

The total SPR release could be 100 million to 120 million barrels or even higher, Citi analysts said in a note dated November 19. This includes 45 million to 60 million barrels from the United States, around 30 million barrels from China, 5 million barrels from India and 10 million barrels each from Japan and South Korea, the bank estimated.

Rising production in Libya also pushed up prices. Libya’s national oil company (NOC) on Monday gave the go – ahead for production at the Al-Khair oil field near Sirte, said chairman Mustafa Sonallah in a live broadcast.

Investors also followed developments in the Middle East after Saudi state media on Monday reported that the Saudi-led coalition fighting the Iran-backed Houthi movement in Yemen had said it had discovered indications of an imminent danger to navigation and global trade south of The Red Sea. read more

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The 6-month backwardation structure for Brent and WTI – where immediate delivery contracts are more expensive than those for later periods – is narrowing sharply, indicating reduced market tightness in the short term

Reporting by Bozorgmehr Sharafedin in London Further reporting by Sonali Paul, Naveen Thukral and Florence Tan in Singapore, Aaron Sheldrick in Tokyo Editing by David Goodman

Our standards: Thomson Reuters Trust Principles.

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