By Adedapo Adesanya
Brent crude traded below $100 per barrel on Tuesday as it depreciated by $7.61 or 7.1 per cent to settle at $99.49 per barrel on the back of rising fears of a global economic slowdown.
Also, the strengthening of the US Dollar and the COVID-19 curbs in China weakened the price of the West Texas Intermediate (WTI) crude yesterday by $8.25 or 7.9 per cent to $95.84 per barrel.
It was observed that the price of the Brent crude futures yesterday was the lowest since April 11 while the US crude benchmark was also the lowest in three months.
A record-high dollar is triggering more selling liquidation for oil which is generally priced in US Dollars.
Due to a stronger greenback, this makes the commodity more expensive to holders of other currencies.
The Dollar index, which tracks the currency against a basket of six counterparts (Euro, Swiss Franc, Japanese Yen, Canadian Dollar, British Pound, and Swedish Krona), on Tuesday climbed to 108.56, its highest level since October 2002.
Investors tend to view the dollar as a safe haven during market volatility and due to this, they can’t trade at levels that will be profitable.
Also pressuring prices was the renewed COVID-19 travel curbs in China, which are affecting demand projections. This is happening as multiple Chinese cities adopt fresh restrictions, from business shutdowns to broader lockdowns, in an effort to rein in new infections from a highly infectious subvariant of the virus.
The world’s largest oil importer, where the virus initially sprung from, discovered new infections from the highly infectious BA.5.2.1 subvariant of the virus.
Meanwhile, US President, Mr Joe Biden, will make the case for higher oil production from the Organisation of the Petroleum Exporting Countries (OPEC) when he meets Gulf leaders in Saudi Arabia this week.
Spare capacity within the cartel is running low, with most producers pumping at maximum capacity.
Industry experts have asked if OPEC’s largest producer, Saudi Arabia, with a current output of at least 10.5 million barrels per day, has another 1.5 million barrels per day up its sleeve that can be brought online quickly and sustained.
International Energy Agency (IEA) Executive Director, Mr Fatih Birol said that any price caps on Russian oil should include refined products.
“My hope is that the proposal, which is important to minimise the effect on economies around the world, gets buy-in from several countries,” Mr Birol said on the sidelines of the Sydney Energy Forum in Australia.
Western sanctions on Russia over the war in Ukraine, have disrupted trade flows for crude and fuel.
Modupe Gbadeyanka