According to foreign reports, Germany is preparing to stop buying Russian crude oil, paving the way for the EU embargo, crude oil futures prices closed higher on Thursday (28th).
In addition, oil trades were choppy as a surging dollar weighed on commodity prices and as investors gauged concerns about the outbreak’s impact on China’s economy.
energy commodity prices
- West Texas Intermediate crude for June delivery rose $3.34, or 3.3%, to settle at $105.36 a barrel.
- Brent crude for June delivery rose $2.27, or 2.2%, to settle at $107.59 a barrel.
- Brent crude for July delivery rose $2.31, or 2.2%, to settle at $107.26 a barrel, the most actively traded contract.
- Natural gas futures for June delivery fell 6.2% to settle at $6.888 per million Btu.
- Gasoline futures for June delivery rose 1.8% to settle near $3.476 a gallon.
- Thermal fuel futures for June delivery rose 1.8% to settle at $4.008 a gallon.
market driving force
The Wall Street Journal, citing government officials, reported that German representatives to EU institutions on Thursday lifted their opposition to a blanket embargo on Russian supplies, but only if Germany had enough time to find alternatives.
Germany, Europe’s largest economy, has been a major obstacle to the EU’s embargo on Russian supplies. The United States and Britain have previously stopped buying Russian oil.
Russia on Tuesday cut off gas supplies to Poland and Bulgaria, saying the two countries refused to comply with President Putin’s demands to “pay in Russian rubles”. The move sparked fears that Russia may also cut off supplies to other European countries. Meanwhile, Russian Finance Minister Anton Siluanov said on Wednesday that national oil production could fall by 17 percent this year due to Western sanctions, The Wall Street Journal reported.
Phil Flynn, analyst at Price Futures Group, said: “The world is in a frenzy for energy supplies because, as expected, Russia is signaling that they will weaponize European energy supply dominance. The impact is not only felt in the European gas market. , and even products like domestic gasoline are affected, more strongly in diesel.”
“If Russia cuts off gas supplies, Europe will have to quickly find alternative sources, and diesel is now in short supply globally.”
Oil has limited upside amid fears of a widespread lockdown in Beijing due to the spread of the virus. The prolonged lockdown in Shanghai, China’s largest city and business hub, has hurt crude, dampening demand expectations.
Then came the dollar, with the ICE U.S. dollar index rising to a five-year high as the yen tumbled after the Bank of Japan pledged to buy unlimited amounts of 10-year fixed-rate government bonds to defend its yield at 0.25 percent. The euro also remained under pressure, falling below $1.05 for the first time in five years.
“Crude oil has struggled to gain traction in recent days as the dollar index seems to be hitting multi-year highs every day,” said Robert Yawger, executive director of energy futures at Mizuho Securities.
“With the Fed preparing to raise rates by 50 basis points next week and the odds of a 70 basis point hike rising, it seems unlikely that the dollar will stop making new multi-year highs.” A stronger dollar will keep dollar-denominated commodities at risk pressure, as this has a higher opportunity cost for buyers using non-dollar currencies.
U.S. natural gas inventories rose by 40 billion cubic feet last week, the Energy Information Administration (EIA) reported on Thursday. Economists had previously estimated that U.S. natural gas inventories rose by 38 billion cubic feet, according to a Wall Street Journal survey.
