Crude oil prices started the week with a decline in response to the start of a lockdown in Shanghai due to the high number of Covid infections, rekindling concern about the loss of oil demand in the world’s largest importer.
Yesterday morning, Brent crude had slipped to $112 per barrel, Reuters reported earlier today, before rebounding somewhat.
On the other hand, a shortage of Russian gas, prompted by traders’ reaction to Western sanctions against Moscow, served to keep oil at over $100 and will likely continue keeping it there for the observable future unless there is a change in the sanction regime.
The Wall Street Journal reported that we are only beginning to see the first effects of the sanction boomerang now, since oil deals canceled at the start of the Russian invasion of Ukraine would have had delivery dates last week.
The report cited data from Kpler saying that exports of Russian crude by sea fell to the lowest in eight months in the week to March 25.
It also cited data from UBS, which has estimated that disruptions have affected some 2 million barrels daily of Russian crude. According to the International Energy Agency, this could reach 3 million barrels daily by April.
“Commodities tend to price in the now, not the future,” Giovanni Staunovo, a commodity analyst at UBS, said, as quoted by the WSJ. “We are starting to see some disruption in the volumes of both crude oil and products from Russia. If we get more disruptions going forward, the price will react even more.”
On the other hand, the Shanghai lockdown is certainly bad news for oil.
“Shanghai’s lockdown prompted a fresh sell-off from disappointed investors as they expected such a lockdown would be avoided,” according to Kazuhiko Saito, chief analyst of Fujitomi Securities Co., who spoke to Reuters.