On account of an easing of the dollar, renewed hopes for a quick relaxation to China’s zero-Covid policy which gave hope for elevated economic activities in the country, lingering risks of supply owing to supply chain crisis, the OPEC+ cuts in crude supply, a looming EU ban on Russian oil from December, a slide in US crude stockpiles and a report that US and EU are likely to settle for a more loosely policed cap at a higher price than once envisioned, crude oil prices edged higher and reached 98.45 dollar per barrel on Friday- first time since August 30.
Meanwhile, Nigeria- the largest oil and gas producer in Africa, is experiencing steady decline in its oil output in recent months, falling below the one million a barrel mark, which, too, made it a little dim. Crude oil theft and vandalism have reached unprecedented levels in this African country, which have triggered shut-ins of oil export terminals. These all reasons contributed to the scaling up of crude prices. A weaker dollar invariably makes crude oil cheaper for those having other currencies and depend majorly on imports.
However, demand concerns still appear to be a balancing factor, weighing on the market. The increasingly gloomy macro economic outlook almost across the world, dampens the sentiments. China, which is the largest importer of crude oil in the global market, has signaled the continuation of its zero-Covid policy, forcing the crude to tumble by more than 1 dollar per barrel on Monday.
Chinese government has reiterated its commitment to have a strict Covid containment approach, as the infected cases have climbed in the country, which may force the authorities to impose more restrictions in the country, darkening the demand outlook in the days to come. Earlier, there were reports that China may relax Covid containment measures. The continued zero-Covid policy and the lockdowns for long, have badly impacted China’s economy.
Only recently, OPEC+ countries agreed to cut production by two million barrels per day in November, which is the largest since the pandemic struck. The oil cartel is further expected to intervene in markets, which may push the crude prices up.
However, in the meantime, US crude oil to Asian countries appears to touch a record 1.8 million barrels per day in November. China, India and South Korea are turning to be the biggest US crude oil buyers amid growing fears of a recession in the US, forcing the Federal Reserve to say that it is very premature to be thinking about pausing interest rate hikes.
Things don’t appear fine elsewhere too. The Bank of England has warned that Britain may experience its longest recession and the economy of the country may not be able to grow for another two years or so.
Earlier, the delayed Chinese third quarter GDP numbers were considerably lower than the Chinese government’s target of 5.5%, majorly weighed by its long standing Covid-zero policy along with a few other factors.
In between, the economic conditions in Europe are not encouraging as a good number of companies are finding it tough to access new credit and several economies appear to be on the brink of a recession. Clearly, forces of different hues are working simultaneously. In such a situation it is very difficult to predict which way the crude oil prices may swing, however, it is certain crude prices would be hanging in balance at least for now.
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