The price of a barrel of West Texas Intermediate (WTI), the American reference variety, ended Tuesday in sharp decline, at its lowest level of the year at the end, on a market still concerned about a slump in demand.
WTI for January delivery ended down 3.5% at $74.25. In two sessions, US crude fell more than 7%. In session on Tuesday, it fell to 73.41 dollars, a depth more explored since the end of December 2021. As for the barrel of Brent from the North Sea, with maturity in February, it lost 4% to settle at $79.35, closing below $80 for the first time since early January.
“The potential effect of another round of rate hikes [de la banque centrale américaine] scared the market about the possible repercussions on the global economy,” said Susannah Streeter of Hargreaves Lansdown, a sentiment that had already justified Monday’s trend reversal. A stronger-than-expected monetary tightening could weaken demand for black gold and depress prices even further.
Added to this are the uncertainties surrounding the health situation in China, the world’s largest importer, with the lifting of restrictions remaining very gradual. Another element: the recovery of the dollar, which has recovered in the last two days after several weeks of sliding, which is unfavorable to oil prices, most often denominated in greenbacks.
For Bart Melek, of TD Securities, on the supply side, some operators were disappointed by the maintenance, announced on Sunday, of the production of the members of the Organization of the Petroleum Exporting Countries (OPEC) and their allies of the OPEC + agreement. As a result, “the market is worried about seeing too much supply” on a global scale, explains the analyst.
Russian oil
Operators also reacted to the entry into force of the European embargo on Russian oil, together with a price cap mechanism for deliveries to places other than Europe. For Craig Erlam, an analyst at Oanda, “in many ways, this does not improve visibility in the crude oil sector; we can even say [que ces mesures] make the outlook more uncertain”. At this point, “it seems that the only thing guaranteed in the oil market, for now, is volatility,” he claims.
Moscow has repeatedly asserted that Russia will not sell oil to countries applying the cap.
For Mr. Erlam, this mechanism is probably considered by investors as a “status quo”, especially as Russia tries to improve its “ability to circumvent sanctions”. “This means that production remains stable overall,” he points out.
After Tuesday’s tumble, the Urals, the main reference variety of Russian oil, for delivery in February, stood at 60 dollars, exactly the ceiling price. According to an official of a shipping company specializing in oil, who spoke on condition of anonymity, some varieties are trading at a price closer to $50 a barrel, rendering the cap inoperative.
“I have no doubt that there will be buyers for our” oil products, Russian Deputy Foreign Minister Sergey Ryabkov said on Tuesday, quoted by Russian news agencies. “You have people who were positioned to buy”, betting on major disruptions following the embargo and the cap, argued Bill O’Grady, of Confluence Investment. “But nothing of what they expected happened, and this gave rise to a long liquidation” of positions, that is to say a massive disengagement of speculative operators, which caused prices to swing.
However, oil’s weakness could only be short-lived, according to Bill O’Grady. The Russian embargo and the cap “will end up disrupting” the flow of Russian oil, warns the analyst, mentioning the bottleneck of tankers that has formed in recent hours near the Bosphorus Strait, according to several media. The blockage would be due to the will of the Turkish authorities to obtain a certificate of insurance from ships wishing to leave the Black Sea, for fear that an accident will not be covered.
Moreover, “OPEC has a great deal of latitude to rebalance supply with demand”, concludes Bart Melek, “and I expect it to reduce production if [la chute des prix] keep on going “.
With Emeline Burckel in London