Market Slumps on Strong Russian Oil Demand

January 28, 2023
Russian Oil Imports

By Adedapo Adesanya

The oil market settled lower on Friday as indications of strong Russian oil supply offset better-than-expected economic growth data in the United States.

Brent futures lost 81 cents or 0.9 per cent to trade at $86.66 per barrel, as the US crude fell by $1.33 or 1.6 per cent to settle at $79.68 per barrel.

The market saw gains as reports emerged that oil loadings from Russia’s Baltic ports are set to rise by 50 per cent this month from December. It was backed by sellers moving to meet strong demand in Asia and benefit from rising global energy prices.

Kazakhstan has changed the name of the oil it exports via Russian seaports to Kazakhstan Export Blend Crude Oil (KEBCO) to dissociate it from oil originating in Russia in order to avoid sanction risks and issues with financing.

Based on this, analysts noted that if the Russian supply remains strong heading into next month, oil is probably going to continue to trend lower.

The Organisation of the Petroleum Exporting Countries and its allies, OPEC+, delegates will meet next week to review crude production levels, with sources from the oil producer group expecting no change to the current output policy.

Another thing the market will be looking forward to is the US Federal Reserve’s next decision on interest rates, which will be made at meeting on January 31 and February 1.

Expectations indicate that the decision will be made against a backdrop of a dip in inflation and gross domestic product (GDP) that grew by a faster-than-expected 2.9 per cent in the fourth quarter.

Support came from China which showed that COVID-19 cases are down 72 per cent from a peak early this month, while daily deaths among COVID-19 patients in hospitals have dropped by 79 per cent from their peak.

This points to a normalisation of the Chinese economy and boosts expectations of a recovery in oil demand.

US energy firms this week kept oil and natural gas rigs steady at 771, energy services firm Baker Hughes Co. said in its report on Friday.

Adedapo Adesanya

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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