Oil prices dismal over demand uncertainties

Crude oil prices at the international market are sliding as demand uncertainties triggered by Covid-19 related protests hit China. Anger over China’s zero COVID-19 policy has intensified, sending residents in major cities into the streets as they clash with police over restrictions that have taken a toll on the economy and people’s freedom.

From about $90 per barrel about a week ago, the community currently hovers around $80, losing close to about $10. The development comes with mixed feelings for a country like Nigeria, who on one hand has its oil earnings eroded by import of petroleum products and on the other struggling to produce enough crude oil.

Chinese stocks had on Monday tumbled even though its monetary easing measures failed to offset investor worries about the protests in the world’s second-largest economy, while the yuan weakened versus the dollar.

General Manager of research at Nissan Securities, Hiroyuki Kikukawa was quoted in local media saying “On top of growing concerns about weaker fuel demand in China due to a surge in COVID-19 cases, political uncertainty, caused by rare protests over the government’s stringent COVID restrictions in Shanghai, prompted selling,” said,

WTI’s trading range is expected to fall to $70-$75, he said, adding the market could stay volatile depending on the outcome of the OPEC+ meeting and the price cap on Russian oil.

China is the world’s top oil importer and most stakeholders have expressed sentiment as concerns mount in the oil sector over demand in China and a lack of clear signs from oil producers to further cut output.

Although unlikely, some stakeholders noted that OPEC+ may agree to cutting production. The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, will meet on Dec. 4.

In October, OPEC+ agreed to reduce its output target by 2 million barrels per day through 2023. The next OPEC+ meeting will consider the condition and balance of the market, Iraq’s state news agency quoted Saadoun Mohsen, a senior official at the country’s state oil marketer SOMO, as saying on Saturday.

Investors also focused on Western plans for a price cap on Russian oil. Group of Seven (G7) and European Union diplomats have been discussing a price cap on Russian oil of between $65 and $70 a barrel, with the aim of limiting revenue to fund Moscow’s military offensive in Ukraine without disrupting global oil markets.