Oil Sinks on Demand Concerns as IEA Sees Energy Crisis Enduring

Jul 12, 2022

(Bloomberg) Oil extended losses as a Covid-19 resurgence in China added to concerns about a global economic slowdown, with the International Energy Agency warning the worst of the energy crisis may be ahead.

West Texas Intermediate lost as much as 2.9% to near $101 a barrel. Bearish sentiment has filtered through commodities as rising virus cases in China and a looming US inflation print stoke concerns about the demand outlook. A stronger dollar has added to the pressure, making oil less attractive to investors.

Crude has tumbled since early June on escalating fears the US may be heading for a recession as central banks aggressively raise rates to combat inflation. Nations are experiencing the first global energy crisis and “we might not have seen the worst of it yet,” IEA Executive Director Fatih Birol said in Sydney.

ROO.AI Oil and Gas Field Service Software

Concerns of an economic slowdown have weighed on crude

“Oil markets started the week in a risk-off setting with China’s rise in Covid and a stronger dollar being the biggest drag on flat price,” said Keshav Lohiya, founder of consultant Oilytics.

Prices
WTI for August delivery dropped 2.3% to $101.65 a barrel at 9:53 a.m. in London. Brent for September settlement fell 1.9% to $105.07 a barrel.

President Joe Biden is scheduled to visit Saudi Arabia this week during a tour to the Middle East as he seeks to tame high energy prices that have roiled the global economy. The US believes OPEC has room to raise production should Biden’s upcoming visit to the region yield any agreements.

The market has tightened this year, in part due to upended trade flows from Russia after its invasion of Ukraine. US Energy Secretary Jennifer Granholm is set to meet with counterparts from Australia, India and Japan during a visit to Sydney, and will use talks to rally support for a cap on Russian oil prices.