Oil prices started the week over a dollar down as bearish sentiment continues to weigh heavily on the markets. The prices fell early on September 12 morning as the bearish sentiment continued to weigh on markets amid expectations of more interest rate hikes and fears about Chinese oil demand.
Brent started the week over a dollar down at $91.80 per barrel at the time of publication. Notably, West Texas Intermediate was trading at $85.64 per barrel, also down by over a dollar per barrel.
The major downside pressure on oil prices in the last several days has been a recent report that China may see its yearly oil demand shrink for the first time since 2002 due to COVID-19 restrictions under Beijing’s zero-Covid policy.
Oil imports in the last eight months of the year were down for the first time since 2004, Reuters reported earlier this September, noting that there were now some expectations for a plunge in fuel demand during the forthcoming holiday season.
In that context, Energy Aspects projected that China’s fuel demand may drop by 380,000 bpd for the entire year due to the restrictions. IG market analyst Jun Rong Yeap, said, as quoted by Reuters:
“The lingering presence of headwinds from China’s renewed virus restrictions and further moderation in global economic activities could still draw some reservations over a more sustained upside.”
Critical forecasts about Chinese demand have now coincided with a more interventionist policy from central banks and governments, with both the Federal Reserve and the European Central Bank planning more rate hikes trying to tame the surging inflation.
Recently, Reuters quoted a Commonwealth of Australia Bank analyst, stating:
Buy Crypto Now“Demand concerns center on the impact of rising interest rates to combat inflation and China’s COVID-zero policy.”
Prices may surge in the coming months, nonetheless, as an EU embargo on Russian oil and fuel imports comes into effect. In the meantime, the G7 seems to be considering sanctions on oil importers that do not comply with the oil price cap the group agreed upon earlier this week. Russia has said that it will not sell oil to price cap participants.
While the downside trend in oil prices is clear, the looming EU embargo on Russian oil and threats by Russia to cut supply might also send oil prices higher.
