Global oil prices rebounded slightly on Wednesday following Russia’s announcement that natural gas exports to Bulgaria and Poland will be halted today if the two nations fail to pay for gas in Roubles.
Brent crude oil, against which Nigerian oil is priced, pared losses to $105.22 a barrel at 12:54 pm Nigerian time. The U.S. West Texas Intermediate rose to $101.09 a barrel.
On Monday, oil prices fell on rising COVID-19 cases in China as energy traders and investors cut down on their oil positions on concerns the world’s largest importer of crude oil could increase lockdown restrictions, and subsequently suffer a drop in productivity.
“The hit from Chinese lockdowns is over a million barrels a day and the testing of 12 districts over the next five days will determine the next major move for crude prices,” wrote Edward Moya, a senior market analyst for OANDA in a note.
Also, the jump in the U.S dollar to a two-year high dragged on crude oil prices. The strong U.S dollar will make oil more expensive for buyers outside the U.S.
“Supply fears are not the primary focus for energy traders, and now you have a surging dollar that is adding extra pressure across all commodities,” OANDA’s Moya said.
However, Russia’s announcement that it would cut gas supplies to Poland and Bulgaria on Wednesday halted the crude oil decline and support the current rebound.
“A U.S. crude build last week and still solid Russian crude exports is limiting the upside for crude,” said UBS commodity analyst Giovanni Stauvono.
“This in a risk off environment with a stronger U.S. dollar and mobility restrictions in the second largest oil consumer China.”