By Adedapo Adesanya
Oil prices showed no signs of stopping their fall on Tuesday, May 10 as fears of an economic slowdown saw the market bleed by more than 3 per cent.
Specifically, the Brent crude fell by 3.2 per cent or $3.40 to sell at $102.50 per barrel, while the United States West Texas Intermediate (WTI) went down by $3.24 or 3.14 per cent to $99.85 per barrel.
The demand outlook is pressured by coronavirus lockdowns in China with oil demand being threatened by the extended measures as part of its Zero COVID policy.
Some of China’s biggest cities have been hit by major COVID lockdowns this spring and it’s having a disruptive effect on the country’s economy.
Last week, Chinese President Xi Jinping reiterated that his government has no intention of turning away from the controversial Zero-COVID commitment, as well as urged officials to unswervingly adhere to the general policy and warned against any criticism or doubting of the policy.
Also, a slowdown in plans by the European Union (EU) over whether or not it is going to embargo Russian oil also pressured prices.
The EU Commission has delayed acting on the proposal as it will need all the approval of the 27 members before it can fully implement that plan.
The commission plans to offer Eastern European EU nations that have so far objected to an embargo on Russian oil (Hungary, Slovakia, and the Czech Republic) more money to upgrade oil infrastructure, though their sanctions waivers are still to be agreed upon.
There are indications that the bloc could reach an agreement this week.
Joining the pressure factors, the US Dollar held near a two-decade high ahead of a reading on inflation that could hint at the outlook for Fed policy.
On the supply side, the US Energy Information Administration (EIA) trimmed its US crude oil production forecasts for 2022 and 2023. It now expects output in 2022 to average 11.9 million barrels per day compared with its previous estimate of 12 million barrels per day.
In the US, crude inventories likely fell last week, this will be confirmed by data from the EIA on Wednesday.
Modupe Gbadeyanka