Oil prices fell over 5% to a two-week low on Monday amid talks of a diplomatic solution to the war in Eastern Europe and prospects of reduced demand in COVID-hit China. WTI has fallen 20% since closing at the highest price since 2008 just one week ago.
In mid-afternoon trading today, WTI futures were down 7.4% at $95.36/bbl, Brent was down 7.5% at $98.85/bbl and U.S. natural gas was down 1.9% at $4.57/MMBtu. Brent and WTI have logged their most volatile 30 days since June of 2020.
Oil prices could dip later this week after the U.S. Federal Reserve raises interest rates, making dollar-denominated oil more expensive for holders of foreign currencies.
More oil news related to the war in Europe:
The EU, which gets 40% of its natural gas and 25% of its oil from Russia, faces increasing pressure to join the U.K. and U.S. in banning Russian energy imports.
Hundreds of thousands of Ukrainians are without gas supplies due to destroyed local infrastructure, even as gas lines moving Russian gas through the country to Europe continue to flow.
Very Large Crude Carriers are facing a margin squeeze as marine fuel costs have spiked over 40% since Russia’s invasion of Ukraine, while rates to ship from the Middle East have not included premiums charged elsewhere.
India is entertaining Russian offers for crude and other commodities at discounted prices via rupee-ruble transactions, with an initial sale of 3 million barrels taking place Monday. Still, India indicated it may be forced to release more oil from national reserves to make up for supply shortages.
Freight carloads on U.S. railroads in the category that includes fracking sand rose 36.3% in February from the year before, a sign that the U.S. drilling sector is stirring in response to soaring oil prices.
The average price at which businesses lock in hedges against oil and gas price swings has gone up between 40%-50% since last year.
U.S. talks to import more crude oil from Venezuela have stalled, the White House said.
Volatile natural gas prices are driving up U.S. utility prices, with customers in some parts of the nation seeing power bills rise by 20% recently.
The U.S. government reported a crude decrease of 1.8 million barrels last week, with stocks roughly 17% lower than at the end of February 2021. Stockpiles at Oklahoma’s Cushing hub rose for the first time this year, traders said.
A giant solar and battery complex in the Australian outback is expected to meet 15% of Singapore’s energy needs via an undersea cable currently under construction.
Supply Chain
More supply chain news related to the war in Europe:
The Russian Maritime Register of Shipping was removed from the world’s top association of ship certifiers, a critical step for obtaining insurance and entry into ports. With other certifying agencies such as Lloyd’s Register and Norway’s DNV leaving the country, dozens of Russian tankers and bulk carriers will likely be pulled from operation in the coming months.
British officials have reportedly asked the nation’s brick makers to prepare for production slowdowns caused by energy shortages.
Container ship queues are rising at ports across China, reflecting impacts from the nation’s COVID-zero policies amid rising infection counts. The backlog has doubled to 72 vessels in just the past two weeks off Qingdao port, one of the nation’s largest.
Hong Kong’s COVID restrictions are causing its flagship carrier, Cathay Pacific, to operate passenger flights at just 2% of pre-pandemic capacity and cargo routes at under one-third of pre-pandemic capacity, the airline said.
Container ships saw an average delay of 7.38 days to get to ports across the globe in January, down slightly from December but the sixth straight month the figure has exceeded seven days.
Nearly 8,000 employees in Georgia’s trucking industry have passed away from COVID-19, accounting for roughly a quarter of the state’s virus fatalities.
DHL parent Deutsche Post saw revenue rise 22.5% in fiscal 2021 to a record 81 billion euros.
Despite higher prices for its goods, Campbell Soup’s quarterly sales dipped 3% from the year-ago period on labor and supply constraints.
China remained the top U.S. trading partner in January, with trade rising 14% year over year on a 51% surge in Chinese imports and an 11% decline in U.S. exports.
The number of self-employed workers in the U.S. stood at 10 million in February, 400,000 higher than at the beginning of the pandemic.
Ford’s new “Electric University” training program will boost electric vehicle servicing capabilities in its dealer network.
International Markets
More news related to the war in Europe:
By Sunday, over 350 companies had either suspended, halted, or restricted their Russian operations in reaction to the Kremlin’s invasion of Ukraine.
Citigroup is cutting more ties with Russia and will halt all new business in the nation. The firm has nearly $10 billion of exposure in Russia, the most of any U.S. bank, and warned it could lose nearly half that in a worst-case scenario.
Running out of options to prop up the ailing ruble, Russia’s central bank announced a new way to calculate the dollar exchange rate yesterday by expanding the currency’s trading time range and taking in a larger number of transactions throughout the day. Analysts say the move is not likely to change underlying sentiment in the currency, however.
Russia’s 20% emergency interest rate will likely be extended at the end of this week.
Singapore took the rare step of joining in Western sanctions on Russia over fears that the invasion could spark a world order “profoundly inimical to the security and survival of smaller states.”
China reported 1,337 new COVID-19 cases Monday. Authorities locked down and imposed a travel ban on the 24 million residents of northeastern Jilin province, the first time China has sealed off an entire region since April 2020.
Hong Kong reported over 27,000 new COVID-19 cases Monday. The island averaged over 280 fatalities and 21,000 cases per day the past week.
The electric vehicle unit of China’s heavily indebted Evergrande property developer has been given the green light to start sales.
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