WTI Oil Falls Below $110 As Shanghai Locks Down Again
Crude oil took a deep dive during the initial coronavirus panic and the lockdown two years ago, with the US WTI diving to $-37.50. The global economy dived and the sentiment turned negative. A lot has changed since then and earlier this month US oil reached $130, as the conflict in Ukraine spooked the market in fear of a supply disruption, since Russia is one of the biggest exporters.
The US sanctions on Russia sent crude oil even higher, but the failure to make the rest of the world follow eased the tensions and crude oil fell below $100 by the middle of this month. The bullish momentum picked up again last week, sending WTI crude above $116, but today we are seeing a dive, as China goes into lockdown mode again. Oil futures traded lower on Monday morning on fears that Chinese demand may decline due to the lockdown in Shanghai following a fresh outbreak of coronavirus there. It’s not entirely uncommon to see 4-5% swings in oil prices these days and today is no exception.
Authorities in Shanghai announced the suspension of all activities after the city reported cases of asymptomatic Covid infection. Announcing the lockdown over nine days, the authorities ordered firms and factories to suspend manufacturing activities. As part of Covid control measures, Shanghai authorities also said all public transport and other vehicles will not be allowed to roam the roads.
Crude Oil Daily Chart – WTI Falls Below the 20 SMA Again
Oil finding it hard to keep the bullish momentum going
Oil is dragged lower to start the new week with concerns creeping in after Shanghai is sent into a nine-day lockdown. Growing concerns about the global economy are also adding to that but again, the volatility makes it hard to read into market know-how so to speak. I’ve mentioned that I see the range for oil at the moment to be somewhere between $95 to $125 and that appears to be where we are at now. The wide range allows for added volatility swings like the one we are seeing today.
In the bigger picture, as long as geopolitics continues to be an issue, it is tough to argue against a profound drop in oil prices. The diversification away from Russian oil means many countries will have to look elsewhere for supply in an already tight market with extremely low global inventories. Throw in the continued push toward the green transition in the bigger picture, that’s a recipe to keep oil prices underpinned from a structural perspective.
US WTI Crude Oil Live Chart
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