Oil prices down on stronger dollar, China Covid surge uncertainty

November 15, 2022, 3:04 pm

ANKARA – Oil prices settled lower Monday on a stronger United States dollar and uncertainty over a sharp rise in coronavirus cases in China over the weekend.

US benchmark West Texas Intermediate (WTI) crude futures fell more than 3 percent to below $86 a barrel Monday compared with their daily highs of almost $90 per barrel.

Investors also feared weak demand after the US Federal Reserve signaled another rate hike despite better-than-expected Consumer Price Index (CPI) data released last week.

Last week, the US CPI, which measures changes in the prices of goods and services from the perspective of consumers, signaled a slowdown in inflation, giving hope to investors that the Fed may ease up on interest rate hikes in the coming months.

World oil demand growth

The Organization of the Petroleum Exporting Countries (OPEC) revised down global oil demand growth on Monday by 0.1 million barrels per day (bpd) for 2022 and 2023, respectively, and estimated that demand would grow by 2.5 million and 2.2 million bpd, respectively, in 2022 and 2023.

According to OPEC's most recent monthly oil market report, oil demand in countries of the Organization for Economic Cooperation and Development (OECD) will rise by around 1.3 million bpd this year, as will demand in non-OECD countries by 1.3 million bpd.

Demand in the OECD is expected to rise by 0.3 million bpd next year, while demand in non-OECD countries is seen to increase by 1.9 million bpd.

The second quarter of this year was revised up due to higher-than-expected oil demand in the major OECD consuming countries.

But due to China's "zero Covid-19" policy, ongoing geopolitical uncertainties and weaker economic activity, oil demand in the third and fourth quarters has been revised downward.

Germany, Poland

Germany and Poland announced separate takeovers of natural gas firms that had ties to Russian state-owned company Gazprom.

The German government said it is nationalizing a former subsidiary of Gazprom.

Formerly known as Gazprom Germania, Securing Energy for Europe GmbH (SEFE) is a network operator and indirectly controls Germany's largest gas storage facility in the northwestern town of Rehden.

The Economy Ministry justified the nationalization measures in a statement Monday with the imminent insolvency of SEFE, which would endanger the security of supply in Germany.

"This jeopardizes the continuation of SEFE's business operations and thus the gas supply," it said in a statement, adding the legal basis for the decision was the country's Energy Security Act.

Poland’s government also said it has taken "temporary compulsory management" of Gazprom’s share in the Yamal gas pipeline system in Polish territory to ensure the country’s energy security. (Anadolu)