Oil market is falling but downside is limited

WTI and Brent crude prices fell for a third straight session on Tuesday, with the US benchmark now at a one-year low. Nymex crude for January delivery closed -3.5% at $74.25 a barrel, its lowest level in nearly a year, while Brent crude for February delivery ended -4% at 79.35 USD/barrel, weakest close since Jan. 3. It’s clear that the broader market sell-off and concerns about more aggressive monetary tightening by the Federal Reserve have dampened obscure any positive effects from monetary policy. Russia’s new oil price limit sell.

Oil traders are anxiously waiting to see how the Russian oil price ceiling will affect the market, but the measure has yet to have an impact on prices.

Meanwhile, data released on Monday showed US ISM services index rose slightly to 56.5% in November from 54.4% in October, where “triggering a red flashing signal The Federal Reserve can keep interest rates higher for longer, increasing the likelihood of a recession in the United States and using less energy,” Stephen Innes, managing partner at SPI Asset Management, told Morningstar. ISM surveys purchasing and supply executives from non-manufacturing (or service) companies. Reporting services measure business activity for the entire economy; above 50 indicates growth, while below 50 indicates contraction.

Oil price sentiment is down

So how pessimistic has the oil market sentiment become?

The speculative position on crude oil has been flat for most of 2022, but has shifted in recent weeks, according to commodity analysts at Standard Chartered. Analysts have revealed that their proprietary crude oil money management positioning index compares net long positions on the four major crude oil contracts in New York and London against open interest and historical standards. History is currently more negative than all other items they track. StanChart said that in recent months, crude oil has remained near the bottom of the metals and energy charts in terms of positive implied speculative preference, while gasoline has been near the top.

StanChart Crude Oil Index now at -70.3, lowest since mid-April

2020 (about a week before WTI price settles into negative price). The stats are now down

by 57.4 over the past three weeks marking the biggest three-week drop since February

2020, just before the temporary OPEC+ deal collapsed.

oil locator

oil locator

Source: Standard Chartered

However, StanChart said the situation this time is very different from the historic oil price slump in 2020, which is likely to limit the decline in oil prices. Firstly, analysts note that oil market fundamentals are more supportive this time around than at the beginning of 2020; demand will not fall due to the pandemic and there is no price war among manufacturers at the moment.

Experts say that oil prices are negatively impacted by top-down macro trades with both positive and negative economic news causing the sell-off.

According to StanChart, negative US economic data points are causing a sell-off in oil prices due to recession fears; however, ironically, the positive data points have the same effect as the US dollar strengthens.

Moreover, sentiment was boosted by hopes of China reopening, but as time dragged on, many traders preferred to bet more on the metals market.

Fortunately for oil bulls, commodity experts say new short positions are relatively weak and will soon be filled, helping to support oil prices, although in the short term, capable of highlighting the negative.

Regarding the price ceiling for Russian seaborne oil, StanChart has predicted that it will have little effect on oil prices. Analysts note that China, India and Turkey are the three main fluctuations

Russian oil consumers, and no one has yet suggested that they consider signing up for a cap. Without the participation of those three countries, the amount of Russian oil that has limited mobility would likely be small even if Russia agreed to sell oil on those terms (which they have repeatedly said is will not).

The big question here about market impact is whether Russia can ship oil to its main consumers (including providing adequate insurance) without using EU or G7 services. other or not. StanChart says that Russia has acquired a large enough ‘shadow’ fleet of tankers since its invasion of Ukraine that it could use to transport most of the displaced cargo; However, analysts note that the insurance aspect has the potential to cause serious problems. This has led analysts to predict that Russia’s crude oil production will likely fall by 1.44 million bpd by 2023 due to a growing shortage of high-quality equipment and lack of access to international service companies from time to time.

By Alex Kimani for

More top readings from

Read this article on


News7F: Update the world's latest breaking news online of the day, breaking news, politics, society today, international mainstream news .Updated news 24/7: Entertainment, the World everyday world. Hot news, images, video clips that are updated quickly and reliably

Related Articles

Back to top button