Nov 16, 2022
Oil falls as geopolitical jitters cool, demand concerns resume
We're set to see oil demand grow: Tracy Shuchart
Oil dropped as a pipeline carrying Russian crude to Europe was reported to have restarted and tensions over Poland eased, pushing demand concerns to the market’s forefront.
West Texas Intermediate fell 1.5 per cent to settle above US$85 after a volatile session on Wednesday where futures swung in a US$3 range. Crude sold off after a section of the Druzhba oil pipeline, Europe’s largest crude oil conduit, was reported to have restarted following a power supply disruption.
Oil experienced a volatile 24 hours after a renewed injection of geopolitical risk. An oil tanker linked to an Israeli billionaire was hit by a projectile about 150 miles off the coast of Oman, according to a statement from its owner. Tuesday, a rocket hit a Polish village near the Ukrainian border. NATO and Polish leaders say the incident was unlikely to have been an intentional attack.
[Oil has swung in a $10 range the last few weeks]
In the past few weeks, crude has been largely stuck in a US$10 range. Concerns that a global economic slowdown will deepen are still weighing on the demand outlook, offsetting, for now, the risk posed by low fuel inventories. The International Energy Agency this week said oil stockpiles in developed nations are at the lowest since 2004. Traders are waiting to see what impact Russian oil sanctions, which kick in early next month, will have on global balances.
Meanwhile, price reaction was muted after a U.S. government report showed large crude draws in conjunction with small builds in fuel inventories.
“The macro is overtaking the micro in terms of crude,” said Rob Thummel, a portfolio manager at Tortoise Capital Advisors, which manages roughly US$8 billion in energy-related assets. Concerns over Chinese demand coming back and how oil demand will withstand a potential recession are overwhelming supply fundamentals, he added.
- WTI for December delivery dropped US$1.33 to settle at US$85.59 a barrel in New York.
- Brent for January settlement fell US$1 to settle at US$92.86 a barrel