©Reuters.
Investing.com – Losses widened Wednesday amid growing concerns about rising infection rates from the new doomsday variant sweeping China.
The surge in coronavirus infections in China has raised concerns about a recovery in demand from the world’s largest oil importer, following a few days of brief optimism about easing Chinese restrictions.
oil now
Benchmark crude oil prices fell below $80 a barrel, down 2.6%, to levels near $79.9 a barrel, with losses amounting to about $2.2 a barrel.
US light crude oil Nymex fell 2.7% to levels below $75 a barrel, down about $2 a barrel during these trading moments on Wednesday.
Markets are awaiting US inventories data tomorrow, Thursday, as they watch the results of the US Federal Reserve meeting, which could give more power, raising the cost of buying and transporting oil, which represents a headwind for the prices.
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Market drivers
Crude ended 2022 on a positive note, as it rallied in the final session on Friday last year amid investor optimism about lifting China’s tough restrictions imposed on the Corona virus.
However, the sudden shift in the number of infections with the emergence of the new variant dubbed Resurrection Day has prompted markets to be very pessimistic about falling demand after many countries imposed restrictions on the entry of travelers from China.
Chinese slowdown
“The news out of China was indicative of a slowdown as the country’s purchasing managers’ index fell at the fastest pace in nearly three years in December,” said Brian Steenkamp, a commodity analyst at Schneider Electric.
China’s official manufacturing PMI fell more-than-expected to 47.0 in December, the lowest level since February 2020.
pessimistic data
Caroline Payne of Capital Economics said, “December survey data from China was uniformly downbeat. Declining official services PMI points to declining oil demand.”
“However, we suspect that the damage to industrial activity (and demand for metals) has been more modest,” added Capital Economics’ chief commodity economist.
One particular measure of activity in China’s manufacturing sector, released on Tuesday, contracted for the fifth consecutive month in December as infections disrupted operations and undermined demand.
China’s Caixin manufacturing PMI fell to 49.0 in December from 49.4 in November, according to data released on Tuesday by Caixin Media Co and S&P Global.
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gloomy future
“Looking forward, we expect demand for commodities in China to remain subdued in the first quarter given the continued contraction of the real estate sector, the surge in virus infections and slowing demand for exports,” said Capital’s Carolyn Payne. Economics.
Meanwhile, Kristalina Georgieva, head of the International Monetary Fund, said this year will be tougher for the global economy than 2022. The IMF currently expects a 2.7% global growth rate in 2023, slowing from 3.2% in 2022.
what happened?
Crude oil prices ended trading yesterday, Tuesday, down more than 4% amid volatile transactions, amid renewed fears of weak demand from China and concern over the economic downturn.
IG market analyst Yip Jun Rong said: “Warning signs of a global recession, lackluster recovery in China as coronavirus cases surge, renewed US dollar strength and declining risk appetite are all pressure on oil.
Traders expect Saudi Aramco (TADAWUL:) to cut prices of its main Arab Light crude to Asia in February, after it was set at a 10-month low in January, with oversupply concerns overshadowed the market.
Aramco had decided to lower its official selling prices of Arab light crude to Asia for January shipments to $3.25 a barrel, above the Oman/Dubai average, down $2.2 from last December, according to a price document viewed by the specialist energy platform.
Oil price forecast
Oil market analyst, energy specialist Argos Media platform Nader Etim said central bank tightening operations to tackle inflation, macroeconomic headwinds and fears of recession are all factors influencing the price drop of a barrel of oil globally.
“The market is still concerned about the impact of macro factors, such as economic downward pressure,” analysts at Haitong Futures said.
