The Oil News You Need to Know

Published May 16th, 2022 - 07:21 GMT
The Oil News You Need to Know

Oil Prices News: Get the latest oil price updates before you start now with oil trading as CFDs

Are Oil Prices Slipping Out of Control?

When March 2022 had rolled around, Russian troops were approaching Kyiv and oil prices had reached their highest in seven years. The American oil benchmark, West Texas Intermediate (WTI) oil was up 11.3% at $106.50 a barrel, while the world benchmark, Brent crude, was up 9.5% at $107 a barrel. Due to the growing crisis caused by the Russian invasion, including likely sanctions against Russia, Morgan Stanley foresaw a “Risk premium in oil prices that is likely to remain in coming months”, and hiked their short-term price predictions for the commodity. Some analysts even predicted prices of up to $150 a barrel in coming months.

The USA and her allies decided to bring out 60m barrels of oil amid price surge activity that threatened to grow out of control. Strategic oil reserves were opened to make the release, which actually amounted to only 12 days of Russian oil exports, and which were not likely to make an immediate dent in prices. “Global energy security is under threat, putting the world economy at risk during a fragile stage of the recovery”, said Fatih Birol of the International Energy Agency (IEA). 

Near the start of April, the US announced it was going to release more oil, which triggered off the biggest weekly drop in oil prices in two years. April 4th, however, saw WTI oil prices rebound 4% to over $103. The release was “Only a temporary solution, but offers a buffer over the next six months as producers ramp up production”, explained Craig Erlam of Oanda. Looking forward, German Finance Minister Christian Lindner said he believed the EU should cut all economic connections with Russia as soon as it could, and President Macron of France said the EU might embargo Russian coal and oil. These prospects supported oil prices despite the new releases. Before you start now with oil trading as CFDs, let’s go through some of the latest oil news. 

Supply Deficit

Oil companies might normally take advantage of high oil prices like these to start digging new wells, but, as of the end of March, many oil companies were refusing to dig further. The main reason was that they felt pressure to “Pay back down their debt, or return money to shareholders, rather than going and investing in new wells”, in the words of Paul Ashworth of Capital Economics.  This added stress to consumers struggling to pay for gasoline amid other inflation-impacted costs. 

By mid-April, extended lockdowns in China led to reduced estimates of how much oil demand would grow this year, but WTI oil went up another 3.6% on the 13th of the month as the supply deficit persisted. Saudi Aramco also raised the price of its oil for all of its buyers in April. One reason, according to the IEA, was that OPEC+ had only sent out 10% of the oil they had pledged for March. Another factor was that China had indicated its intention to offer stimulus to its economy, which signalled demand might be boosted after the lockdowns. 

Protests in Libya

In the third week of April, protestors against Libyan Prime Minister Abdul Hamid had managed to force Libya’s largest oil field to close down. Before this, protestors at two Libyan ports had stopped new oil cargoes from being loaded up. OPEC, for its part, was refusing to increase the pace of its output. All of this seemed a bullish sign for the commodity, but ongoing Chinese lockdowns made sure oil prices didn’t move much, so that WTI oil was holding at $107 a barrel on April 18th. 

The USA and the UK had already banned Russian crude oil, with the EU potentially to follow suit, and Russian Deputy Prime Minister Alexander Novak warned that if other nations embargoed Russian oil, prices may “significantly exceed” all-time high points. As April moved into its second half, the Ukraine war grew more severe, with missile attacks on Lviv, and it became clear that Russian oil production was down 7.5% in the first half of the month from March.        

Looking Ahead

The decision to release 60m barrels of oil amid price surge pressure in early March was “Not meaningless” according to Rebecca Babin of CIBC Private Wealth, but, at the same time “Isn’t that much” as Bob Yawger of Mizuho Securities points out. A factor that may have a more potent influence on oil prices is that, in April, China was experiencing the worst unemployment rate and biggest drop in consumer spending since the beginning of 2020. At this time, other energy commodities like natural gas were also surging, making up a more general pattern.

One thing is for sure: with surges of Covid-19 still affecting major global economies like China, and the Russian/Ukraine conflict wreaking havoc with worldwide oil supply and demand, the next few months are due to be rife with plenty of volatility in the oil trading sector, giving rise to both opportunity and risk for CFD traders. Therefore, before you start now with oil trading as CFDs, it’s best to study both the current performance of top companies like WTI oil and Brent oil, as well as stay abreast of any news involving the geopolitical storm that may spell uncertainty for some time to come. 

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