FX.co ★ Oil suffers from bearish pressure amid bad news

Too many negative signals make oil quotes decline even lower. One of such signals is the release of the monthly report of the International Energy Agency (IEA), which predicted a decline in oil demand next year.

This afternoon, January Brent futures fell by 0.86% to $92.34 per barrel on the London ICE Futures exchange. At the same time, WTI futures for December declined 1.45% to $84.26 on the New York Mercantile Exchange.

According to the IEA report, the demand for oil will increase by 180 thousand barrels per day in 2022. However, the projected demand next year is less optimistic. Experts believe that the demand for oil in 2023 will decrease from current levels by 40 thousand barrels per day. The IEA explains this by serious economic problems that are already felt in European countries and in China. The development of a recession in these developed economies is not ruled out.

OPEC officials support the point of view of their colleagues and also expect a global decline in demand, but, unlike IEA experts, their forecast is disappointing for the current year as well. According to OPEC analysts, the demand for oil in 2022 will decrease by 100 thousand barrels per day. The same forecast has been provided for 2023. Next year, the demand will also decrease by 100 thousand. Consequently, the global oil consumption will increase by 2.55 million barrels per day this year and by another 2.24 million next year.

Such pessimistic outlooks weigh on the oil prices, which already plunged last night, having lost a great deal of profits of the previous days.

Though some anti-COVID measures have been lifted in China, the official statistics are still very high. This tendency fuels pessimism, derailing any hopes for a recovery in business activity and demand for raw materials.

Another piece of bad news is that offshore oil exports from Russia fell from 3.6 to 2.89 million barrels per day last week. This happened due to a decrease in shipments from the Baltic ports and the Arctic region.

Nowadays, increasingly more ships do not reveal their destinations. As a rule, such ships head to China, India or Turkey, and the oil volumes carried on them rose to a four-week high of 2.39 million barrels per day. At the same time, the volume of shipments to India is decreasing. Allegedly, most ships with no destination are sent there.

Oil deliveries to Europe decreased from 0.79 to 0.7 million barrels per day last week. Specifically, the imports of raw materials to the Netherlands, Italy and Bulgaria reduced. Russian exporters now need to find new markets for their oil which is about 550 thousand barrels per day.

As for the mechanisms for limiting oil prices from the Russian Federation, the G7 countries and the EU still have not commented on this issue. In addition, this limit price has not been disclosed yet. Obviously, the longer the discussion of this issue goes on, the higher the likelihood of interruptions in the supply of raw materials in December.