Oil rigs work on rigs at Gaoyu Lake in Gaoyou in east China’s Jiangsu Province on Friday, September 17, 2021.
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Oil posted heavy losses on Tuesday, based on Monday retreatMyriad factors weighed on sentiment, including talks between Russia and Ukraine, a potential slowdown in Chinese demand and clearing trades ahead of an expected rate hike from the Federal Reserve on Wednesday.
Both West Texas Intermediate CrudeThe American oil standard, the international standard Brent crude It was below $100 a barrel during Tuesday morning trading on Wall Street, a far cry from over $130 a barrel just a week ago.
West Texas Intermediate crude fell 7.6 percent to trade at $95.26 a barrel, after falling 5.78 percent on Monday. Brent crude fell 6.9 percent to $99.54 a barrel, accelerating Monday’s decline of 5.12 percent.
“Growth concerns about stagflation in Ukraine and Russia, the Federal Open Market Committee’s increase this week, and hopes that progress will be made in the Ukraine-Russia negotiations” are affecting prices, said Jeffrey Haley, senior market analyst at Oanda. “It seems the old adage that the best cure for a price hike is a price hike and it’s as strong as ever,” he added, noting that he believed the top was in oil prices.
Crude oil rose above $100 a barrel for the first time in years on the day Russia invaded Ukraine, and prices have continued to rise as the conflict rages on.
West Texas Intermediate crude hit a high of $130.50 a barrel on March 7, while Brent crude traded as high as $139.26 a barrel. Prices jumped as traders feared disruption to Russian energy exports. The United States and Canada have so far banned Russian energy imports, while the United Kingdom has said it will phase out imports from the country.
But other countries in Europe, which depend on Russian oil and gas, have not taken similar steps.
While it happened somewhat self-punishing, experts say Russian energy is still finding buyers, including from India.
China’s recent moves to curb the spread of Covid-19 are also affecting prices. The country is the world’s largest oil importer, so any slowdown in demand will affect prices.
A deal with Iran could add new barrels of oil to the market. Russian Foreign Minister Sergei Lavrov supports the resumption of the agreement, According to Reuters.
Oil has been particularly volatile in recent sessions, swinging between gains and losses with each new geopolitical development.
As Tamas Varga of brokerage PVM summed up: “Is it the mother of all corrections or is the market increasingly confident that a major supply shock will be avoided?”