Crude oil futures closed lower this session.
The market follows the European Union’s moves towards an embargo on imports of energy assets by Russia.
The impacts of lockdowns in China continue to be monitored, while operators await the meeting of the Organization of Petroleum Exporting Countries and allies (OPEC+) this week.
WTI crude for June closed down 2.62% ($2.76) at $102.41 a barrel on the New York Mercantile Exchange (Nymex), while Brent for the following month fell 2.43 % (US$2.61), at US$104.97 a barrel, on the Intercontinental Exchange (ICE).
Oanda analyst Edward Moya says crude oil prices are falling as Beijing tightens its controls on Covid-19 and that data shows oil flows through Russia have increased.
“Energy operators are not convinced that the EU will be able to move forward with the ban on Russian oil,” he says.
Today, EU economics commissioner Paolo Gentiloni said a sixth sanctions package is being prepared for the bloc and would include the embargo.
Still, Moya believes the commodity has held up at the $100 mark as OPEC+ “looks ready” to increase next month’s oil production target “which is unlikely to be met.”
On the radar is still the monetary decision of the Federal Reserve (Fed, the US central bank) on Wednesday (4), which could bring a surprise hawkishraise the dollar even more and put pressure on commodity prices, points out Moya.
Commerzbank, in turn, also highlights the uncertainties about the European embargo until the end of the year and draws attention to the Hungarian threat to veto such a measure.
The Covid-19 situation in China also puts pressure on this market, he points out.
“Oil trading has been redirected in recent weeks, with Europe seeking alternative supplies to Russia and mainly Asian buyers filling the gap,” says Julius Baer, who says the embargo would finalize that shift.
Unless the West puts diplomatic pressure on buyers, mainly Asians, the likely embargo will not cause a major supply shock and therefore also will not cause an increase in the price of oil, the bank reckons.
“The embargo narrative seems to primarily satisfy European moral needs and neglect the experiences of recent years.”
Source: CNN Brasil
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