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Crude Oil Weakens on Demand Fears; Putin Warnings Have Limited Impacts

Commodities Sep 07, 2022 09:04AM ET
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By Peter Nurse 

Investing.com -- Oil prices fell Wednesday as concerns of sluggish global demand outweighed warnings from President Vladimir Putin about the potential withdrawal of all forms of Russian energy.

By 09:05 ET (13:05 GMT), U.S. crude futures traded 1.5% lower at $85.62 a barrel, while the Brent contract fell 1.5% to $91.44.

U.S. Gasoline RBOB Futures were down 0.3% at $2.4089 a gallon.

Oil prices have been on the wane of late, with new COVID lockdowns in China, one of the biggest sources of concern for crude demand, after the government recently extended a lockdown in the Southwest city of Chengdu.

China is the largest importer of crude in the world, and these lockdowns are likely to curb people movement and curtail economic growth, hitting demand for energy.

Data released Wednesday showed that Chinese crude oil imports fell 9.4% in August from a year earlier.

Also weighing on sentiment is the likelihood that the European Central Bank will hike interest rates again on Thursday as it tries to combat inflation at historic highs, even as growth in the region slows.

German industrial production dropped 0.3% on the month in July, data released Wednesday showed, illustrating that the outlook for Europe's largest economy continues to darken in the wake of the Russian invasion of Ukraine in February and the associated regional energy crisis.

The Saudis released their official selling prices for October and there were some fairly large cuts for Asia and Europe, indicating weaker anticipated demand.

This negative sentiment surrounding global demand has meant that strongly worded warnings from Russia's President Vladimir Putin that he would withhold all forms of his country’s energy from "unfriendly" countries had a limited impact.

"We will not supply anything at all if it is contrary to our interests, in this case economic [interests]," Putin told a conference in Russia's Far East. "No gas, no oil, no coal, no fuel oil, nothing."

European Union energy ministers are set to meet later on Friday to discuss extraordinary measures to curb surging energy prices, including potentially setting a limit on the price of Russian natural gas.

“While price caps may offer some much-needed relief in terms of prices, it will do little to help balance the market through demand destruction,” said analysts at ING, in a note.

Additionally, the decision of the Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+, to cut output by 100,000 barrels a day has had very little impact on the market.

"While on paper the cut is small, in reality, it is even smaller, given that most OPEC+ members are already producing below their target production for October,” ING added. “If this downward pressure continues we cannot rule out OPEC+ holding an emergency meeting, which they have made very clear could happen if necessary."

The American Petroleum Institute will update on U.S. supply-demand balance at 16:30 ET, a day later than usual due to the Labor Day holiday, which typically signals the end of peak summer demand in the U.S.

Crude Oil Weakens on Demand Fears; Putin Warnings Have Limited Impacts
 

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Comments (4)
Omar Faruk
Omar Faruk Sep 07, 2022 10:10AM ET
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2 hours ago seen Article Crude Oil prices should go up. so we invest depends on Article. but Suddenly rates Falling down more then 5$. Can Someone Advise me. Whats the drama is this? the Published Article rate will go Up. but in the same time rates falling down? we lost such a big Amounts.
Ndrew Wen
Ndrew Wen Sep 07, 2022 10:10AM ET
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Yes, all data is u.s manipulation to bring down crude prices. Gasoline in Us is cheap, europe is expensive, so why europe still want to help Us? Euro and Sterling is going down too
Sylvia Doloff
Sylvia Doloff Sep 07, 2022 10:02AM ET
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that's revised fried putinese with howitzer bomb sauce topped with exploding drone salad
Sylvia Doloff
Sylvia Doloff Sep 07, 2022 9:59AM ET
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pluck putinnew Chinese dish fried putinese
Ken Roth
Ken Roth Sep 07, 2022 9:36AM ET
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Putin is getting more and more desperate...now threatens to *******his last revenue with europe still buying oil on contracts until end of year but with a price cap to ensure that putin is not making enough money. His threats only works in russia not in the west  europe will just buy elsewhere they are already plannning this years end, plans will just be rescheduled.
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Ken Roth
Ken Roth Sep 07, 2022 9:36AM ET
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Andrew Ulferts  His fate in russia now relies on the good will of the russian people, because he no longer have any friends in the west...His lies and deceit is now out in the open for all.
Connecticut Yankee
A_Jaundiced_Eye Sep 07, 2022 9:36AM ET
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"...europe will just buy elsewhere..." And "elsewhere' = ???
Ken Roth
Ken Roth Sep 07, 2022 9:36AM ET
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Connecticut Yankee  US, Canada, Middleeast, africa, norway....etc.
Connecticut Yankee
A_Jaundiced_Eye Sep 07, 2022 9:36AM ET
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Ken Roth  Oil, yes, they can buy elsewhere. Natural gas from Canada? Very expensive.
Ken Roth
Ken Roth Sep 07, 2022 9:36AM ET
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Connecticut Yankee  Europe is a very rich continent, so a poor country with BNP the size of Italy have clearly overrated itself watching too much putin tv
 
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