Oil returns to 2021 prices: analysts say the bottom is not yet in sight
7 April 08:39
Oil prices dropped by more than 3% on Monday, continuing last week’s decline. The escalation of trade tensions between the United States and China has heightened fears of a possible recession, which could significantly reduce global demand for crude oil. This was reported by "Komersant Ukrainian" with reference to Reuters.
As of 7:14 a.m. Kyiv time, futures for Brent crude oil fell by $1.41 (2.15%) to $64.17 per barrel, while US West Texas Intermediate (WTI) lost $1.35 (2.18%), falling to $60.64. At the lows of the trading session, both benchmarks fell by more than 3%, reaching their lowest levels since April 2021.
The specter of a global recession
Last Friday, oil prices plunged 7% after China raised tariffs on U.S. goods, escalating the trade war, forcing investors to build a higher probability of recession into their forecasts. Last week, Brent lost 10.9%, and WTI – 10.6%.
“It’s hard to see a bottom for oil prices until the panic in the markets subsides, which is unlikely to happen unless Trump makes a statement to stop the growing fears of a global trade war and recession,”
– commented Vandana Hari, founder of Vanda Insights, an oil market analysis company.
In response to the tariffs imposed by US President Donald Trump, China on Friday announced additional duties of 34% on US goods, confirming investors’ fears of a full-blown global trade war.
Imports of oil, gas, and petroleum products have been exempted from Trump’s new large-scale tariffs, but these measures could cause inflation, slow economic growth, and exacerbate trade disputes. This will have a negative impact on oil prices, making it cheaper.
Federal Reserve Chairman Jerome Powell said on Friday that Trump’s new tariffs are “bigger than expected,” and the economic consequences, including higher inflation and slower growth, are also likely to be more severe.
Читайте нас у Telegram: головні новини коротко
OPEC’s plans
Adding to this downward trend, the Organization of the Petroleum Exporting Countries and its allies (OPEC) have decided to accelerate plans to increase production. The group now aims to return 411,000 barrels per day (bpd) to the market in May, significantly higher than the 135,000 bpd previously planned.
“This potential supply influx, which reverses the cuts that have been maintained over the past two years, represents a significant change in market dynamics and acts as a significant headwind for prices,”
– said Sugandha Sachdeva, founder of New Delhi-based research firm SS WealthStreet.
Over the weekend, leading OPEC ministers emphasized the need for full compliance with oil production targets and called on countries that exceeded quotas to submit plans to compensate for excess production by April 15.
Should we expect problems for Russia?
Russian Urals oil is traditionally sold cheaper than Brent and WTI, and it is also under pressure from additional factors that “legal” oil does not experience, namely Western sanctions. However, throughout the three years of the full-scale war with Ukraine, Russia has been successfully selling its oil – its main buyers today are China and India.
However, Russian oil is currently not included in market charts, so its price is tracked indirectly. According to the Ministry of Finance, on Friday, Urals cost $60.76 per barrel. US dollars per barrel.
Unfortunately, market analysts’ forecasts do not yet promise Russia any problems related to the price of oil, as it still has a very large backlash for sales. According to economic expert Oleg Pendzin, even a price of $50 per barrel is still acceptable for Russia.
“Currently, the direct cost of Russian oil production is about $37-38 per barrel. This is the direct cost. The critical figure for Russia is the sales price of $45,”
– the economist explained exclusively for .
This figure still looks unrealistic for market analysts, based on the current circumstances. Therefore, the only more likely way to hurt Russia over oil is to tighten sanctions, including secondary sanctions against its buyers. The point of this step is to make it physically impossible for Russia to sell large volumes of oil and thus receive funds to continue its aggressive war of aggression.
Читайте нас у Telegram: головні новини коротко
