Global oil prices plunged on Wednesday as concerns over demand outweighed supply concerns. Energy investors fear recession would hurt demand regardless of current supply challenges being faced by the OPEC and allies due to Russian sanctions.
Brent crude oil, the international benchmark for Nigerian crude, plunged from $114.70 a barrel on Monday to $98.49 a barrel on Wednesday before pulling back to $100.21 a barrel on Thursday at 1:57 am Nigerian time.
The U.S. West Intermediate Oil fell to $93.15 a barrel on Wednesday before paring losses to $95.13 per barrel on Thursday.
Both contracts recorded their largest daily drop since March on Tuesday on recession fears and other bearish pressures, which also kept a lid on Wednesday’s price rise.
Oil prices have seen a knock from a resurgent dollar, which is holding at a 20-year high against the euro and multi-month peaks against other major currencies.
A stronger U.S. dollar usually makes oil more expensive in other currencies, which could curb demand.
Renewed concerns of COVID-19 lockdowns across China could also cap oil price gains.
Adding to the downward pressure on prices, all oil and gas fields that were affected by a strike in Norway’s petroleum sector are expected to be back in full operation within a couple of days, Equinor said on Wednesday.
Norway’s government intervened to end the strike on Tuesday.
But analysts expect a quick resurgence in oil prices as supply tightness persists, pointing to front-month spreads which have held up despite Tuesday’s price fall.
Brent’s six-month market structure was in steep backwardation of $14.82 a barrel, little changed from the previous day. Backwardation exists when contracts for near-term delivery of oil are priced higher than those for later months.
“The price action overnight, with both contracts trading in near 15 dollar ranges, hints more at panic and forced liquidation, than a structural change in the tight supply-demand situation globally,” said Jeffrey Halley, a senior market analyst at OANDA, adding that oil prices may be in danger of overshooting to the downside.
Meanwhile, Caspian Pipeline Consortium (CPC), which takes oil from Kazakhstan to the Black Sea via one of the world’s largest pipelines, has been told by a Russian court to suspend activity for 30 days, although sources said exports were still flowing.
Operations at Kazakhstan’s giant Tengiz oilfield were not disrupted by an explosion on Wednesday and were continuing, the operator said, after the blast killed two workers and injured three.
