Written by: Sebastien Bischeri
Coronavirus in China, fights in Ukraine, sanctions against Russia – what else could raise concerns about oil supply in an already tense market?
An economic slowdown in China, which appears to have adopted a “zero-tolerance” epidemic policy, was weighing on oil prices as the country’s COVID case count rose.
Finally, some restrictions in Shanghai are being eased in certain neighborhoods following growing dissatisfaction with the very strict lockdown that has locked 25 million people in their homes. That lockdown has caused food shortages and forced thousands of citizens into isolation in specialized centers, consequently causing a food delivery surge and staff shortages.
In Ukraine, fears of fighting, which could intensify in the eastern region (around the Donbas), are also stirring the markets. Meanwhile, OPEC Secretary General HE Mohammad Sanusi Barkindo warned the European Union on Monday that the 7 million barrels a day of Russian exports, supposed to be lost due to sanctions, could not be fully replaced, reports the financial press.
Such concerns may again raise fears about the supply of black gold in an already tight market. It was added that the current and future sanctions on Russia could create one of the worst oil supply shocks ever and it would be impossible to replace those volumes, as OPEC signaled it would not pump more.
WTI Crude Oil (CLK22) Futures (May contract, daily chart)
Henry Hub Natural Gas (NGK22) Futures (May contract, daily chart)
Related: Oil: Are Sanctions on Russia Effective or Counterproductive?