Oil retreats in a scenario of risk aversion, with news about covid in China

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Oil closed sharply lower on Wednesday (18), penalized by a session of risk aversion, amid news that China imposed a new quarantine area in the port region of Binhai, in Tianjin.

In this context, plans by the European Union (EU) to reduce its dependence on fossil fuels from Russia and stock data in the US took a back seat.

On the New York Mercantile Exchange (Nymex), the WTI oil barrel for July dropped 2.36% (US$ 2.59), to US$ 107.04, while Brent oil for the same month was down 2.25 % ($2.82) at $109.11 on the Intercontinental Exchange (ICE).

After trading without much momentum for most of the morning, oil followed the downward trend in global markets after the news circulated among traders – later confirmed by the Bloomberg – that a port region in the Chinese metropolis of Tianjin has been quarantined.

The fact frustrated the expectation of relaxation of sanitary measures in the second largest global economy. This week, Shanghai began a period of gradual reopening, with a complete withdrawal from the quarantine expected on June 1.

Investors also followed, in the background, the release of US oil and oil inventories figures last week. According to Capital Economics, although the decline in stocked barrels indicates strength in exports, demand for derivatives should worsen in the coming months due to high prices.

Still on the market’s radar, the EU detailed its plan to reduce the bloc’s dependence on Russian energy production, in order to accelerate the transition to renewable sources amid the shock caused by the Russian offensive in Ukraine.

Meanwhile, the EU’s decision to cut imports of oil produced in Russia remains undefined.

“A deal on the oil embargo remains likely, but is unlikely to be closed before the end of the month. EU member states are refusing to move forward with the agenda without Hungary agreeing for fear of creating divisions in the bloc’s unified stance against Russia.

Source: CNN Brasil

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