The price of crude oil on world markets may be on its way to a 10 percent drop this week. Since the beginning of the year, contract prices for a barrel of WTI appear to have dropped 4 percent to around $72.
WTI crude oil futures stabilized around $72 a barrel on Friday, falling in recent days as renewed recession fears may have worried financial markets, overshadowing optimism over China's loosening of Covid restrictions and lingering demand concerns, tradingeconomics reported.
The U.S. oil benchmark may have been under pressure all week, possibly due to economic concerns, with top U.S. company executives in the U.S. "sounding the alarm" on a potential recession next year. This was also the view expressed by the Fitch rating agency this week. Tightening financial conditions may also have taken a toll on the markets, as it is expected that the U.S. Federal Reserve may continue to raise interest rates and keep them higher for longer.
Meanwhile, investors seemed to welcome the easing of Covid restrictions in China for a while, raising hopes of a broader economic opening that could boost demand in the world's largest oil importer.
Source: Conotoxia MT5, XTIUSD, Weekly
China to change oil supply direction?
Chinese President Xi Jinping said Thursday that Beijing is ready to increase oil trade with Saudi Arabia, as well as strengthen coordination on energy policy.
China also intends to deepen its ties with the kingdom in areas such as infrastructure construction, investment, e-commerce, aerospace research, security and counterterrorism efforts, Xi told Saudi Crown Prince Mohammed bin Salman during his visit to Riyadh, according to Chinese state media and information from the BBN service.
An opportunity to replenish U.S. strategic oil reserves?
There are also rumors in the market that the Americans may be manipulating oil prices in some way to be able to replenish strategic oil reserves at the lowest possible cost. At the beginning of December, they fell to their lowest level since 1984, as the Americans, by releasing them into the market, are trying to whip up fuel prices to lower inflation. However, only further data will be able to show whether the Energy Department has actually replenished them, at what appear to be currently attractive prices.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service)
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