World Oil Prices Are Declining, This is the Trigger

JAKARTA, KOMPAS.com – Price oil The world’s crude oil continues to weaken due to the increase in Covid-19 cases which is getting worse in China. These conditions raise fears of falling demand crude oil from that country.

quote Bloomberg Monday (11/4/2022), at 8.30 WIB oil prices Brent crude futures for the June 2022 contract fell 1.76 percent to 100.97 dollars per barrel.

Meanwhile, the price of US West Texas Intermediate (WTI) oil for the May 2022 contract fell 1.83 percent to the level of 96.46 US dollars per barrel.

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The spread of Covid-19 continues to increase in China, so the country’s authorities carry out lockdown in a number of cities, including Shanghai. The increase in cases in Shanghai reached 26,000 new cases on Sunday, making it unclear when restrictions will be lifted.

Shanghai is a central business city with about 26 million people and accounts for about 4 percent of China’s oil consumption. China is the largest crude oil importer in the world.

“There doesn’t seem to be an end in sight to the lockdown at this point, and clearly the longer this lasts, the more it hits oil demand (from China),” said Warren Patterson, head of commodity strategy at ING Groep NV in Singapore.

The world crude oil market has been volatile for weeks. Prices had soared after the invasion Russia to Ukraine last February, creating concerns about tightening world oil supplies.

A number of sanctions imposed by Western countries against Russia have also disrupted the oil trade of the country led by Vladimir Putin.

Russia is the world’s 2nd largest exporter of crude oil, accounting for 7 percent of total global oil. Energy sanctions disrupt Russian oil trade by around 4-5 million barrels per day on global markets.

But now, the condition of the Omicron distribution in China, and the plans of member countries of the International Energy Agency (IEA) to release oil from strategic reserves, have made the price of this commodity increasingly eroded.

IEA member countries will release 120 million barrels of oil from strategic reserves, including 60 million barrels from the United States. The US commitment is part of a plan to release one million barrels per day over the next 6 months for a gross total of 180 million barrels.

If this is realized, it would be the second time the IEA has released reserves this year, effectively increasing worldwide supply by around 2 million barrels per day for at least the next two months.

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