Oil prices dip as China COVID outbreak worsens

Oil prices dip as China COVID outbreak worsens
A model of 3D printed oil barrels is seen in front of displayed stock graph going down in this illustration taken, December 1, 2021. REUTERS/Dado Ruvic/Illustration

The price of oil is plunging right now, and it isn’t just because of the situation in Ukraine.

The price of oil went up when most of the world stopped buying it from Russia, driving down supply. But now, it’s looking like Russia is willing to help finalize the Iran nuclear deal. This would mean that bans on Iranian oil exports would ease up a little, bringing the global supply back up a bit.

But there’s another component to this – the COVID lockdown in China.

When you tell about 30 million people to stop driving around, it turns out they end up buying less gas. Increasing supply from Iran plus decreasing demand from China is helping push the price of oil down a bit more, stabilizing the market as a whole.

Key comments:

“Whilst reports of promising talks (between Russia and Ukraine) are to be welcomed, it is hard to see how either side at this stage would be prepared to make concessions that would be acceptable to any party," said a research note from Kpler that was skeptical of the chances of an Iran Nuclear Deal being reached. “In this current situation, it is hard to see how crude oil prices are not being under-priced."

“It is estimated that a severe lockdown in China could put 0.5 million bpd of oil consumption at risk, which would be further compounded by fuel shortages due to inflated energy prices," said Louise Dickson, senior oil market analyst for Rystad Energy.

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