By Adedapo Adesanya
Oil crashed below $100 per barrel on Tuesday after losing more than 7 per cent despite the ongoing war in Ukraine and a structurally tight market.
At the session, the Brent crude futures lost $8.06 or 7.54 per cent to trade at $98.84 per barrel and the US West Texas Intermediate (WTI) crude futures depreciated by $7.59 or 7.37 per cent to $95.42 per barrel.
Last week, prices posted their steepest weekly decline in five months as traders assessed potential improvements to the supply outlook that has been disrupted by Russia’s invasion of Ukraine.
This has so far continued into the new week as the Organisation of the Petroleum Exporting Countries (OPEC) said on Tuesday that oil demand in 2022 faced challenges from the action of Russia and rising inflation as crude prices soar, increasing the likelihood of reductions to its forecast for robust demand this year.
In its monthly report, OPEC stuck to its view that world oil demand would rise by 4.15 million barrels per day in 2022 and increased its forecast of global demand for its crude.
But OPEC, which just a month ago had raised the possibility of a more rapid demand increase in 2022, said the war in Ukraine and continued concerns about COVID-19 would have a negative short-term impact on global growth.
World oil consumption is expected to surpass the 100 million barrels per day mark in the third quarter, in line with OPEC’s forecast last month.
The cartel increased its forecast for the year’s total oil use by about 100,000 barrels per day to 100.9 million barrels per day and on an annual basis, OPEC said the world last used more than 100 million barrels per day of oil in 2019.
The market also saw a downward trend over the return of Iranian oil to markets after Russia received guarantees that it could continue trading with Iran after sanctions are lifted.
The US and Canada have banned Russian energy imports, while the United Kingdom has said it will phase out imports from the country.
But other nations in Europe, which are dependent on Russia’s oil and gas, have not enacted similar moves.
The reappearance of COVID-19 in China only added to the downward pressure in oil markets as the country hit a two-year high of 3,500 cases on Monday, doubling day-on-day.
Stringent curbs were reintroduced in many major cities, most notably Shanghai and Shenzhen being put under lockdown, stoking fears that Chinese demand over the upcoming weeks might drop below the stagnating levels of January-February.
On the supply front, just as oil markets are desperate to find additional sources of crude supply, oil majors Eni and Shell in Nigeria concurrently declared force majeure at the Brass River and Bonny Light terminals, respectively, after a blast at a connecting pipeline left both terminals cut off.
