AGL 40.00 No Change ▼ 0.00 (0%)
AIRLINK 127.04 No Change ▼ 0.00 (0%)
BOP 6.67 No Change ▼ 0.00 (0%)
CNERGY 4.51 No Change ▼ 0.00 (0%)
DCL 8.55 No Change ▼ 0.00 (0%)
DFML 41.44 No Change ▼ 0.00 (0%)
DGKC 86.85 No Change ▼ 0.00 (0%)
FCCL 32.28 No Change ▼ 0.00 (0%)
FFBL 64.80 No Change ▼ 0.00 (0%)
FFL 10.25 No Change ▼ 0.00 (0%)
HUBC 109.57 No Change ▼ 0.00 (0%)
HUMNL 14.68 No Change ▼ 0.00 (0%)
KEL 5.05 No Change ▼ 0.00 (0%)
KOSM 7.46 No Change ▼ 0.00 (0%)
MLCF 41.38 No Change ▼ 0.00 (0%)
NBP 60.41 No Change ▼ 0.00 (0%)
OGDC 190.10 No Change ▼ 0.00 (0%)
PAEL 27.83 No Change ▼ 0.00 (0%)
PIBTL 7.83 No Change ▼ 0.00 (0%)
PPL 150.06 No Change ▼ 0.00 (0%)
PRL 26.88 No Change ▼ 0.00 (0%)
PTC 16.07 No Change ▼ 0.00 (0%)
SEARL 86.00 No Change ▼ 0.00 (0%)
TELE 7.71 No Change ▼ 0.00 (0%)
TOMCL 35.41 No Change ▼ 0.00 (0%)
TPLP 8.12 No Change ▼ 0.00 (0%)
TREET 16.41 No Change ▼ 0.00 (0%)
TRG 53.29 No Change ▼ 0.00 (0%)
UNITY 26.16 No Change ▼ 0.00 (0%)
WTL 1.26 No Change ▼ 0.00 (0%)
BR100 10,010 Increased By 126.5 (1.28%)
BR30 31,023 Increased By 422.5 (1.38%)
KSE100 94,192 Increased By 836.5 (0.9%)
KSE30 29,201 Increased By 270.2 (0.93%)

Crude oil futures spent much of 2022 surging, as demand for transportation fuels to travel returned while Russia’s invasion of Ukraine and production cuts from the world’s largest oil-producing nations and their allies (OPEC+) squeezed supply.

Brent crude futures rose above $139 per barrel in March as Russia invaded Ukraine, and then later rose again as buyers reckoned with the bottleneck of two years of refinery closures during the pandemic.

As the year winds to a close, both US and Brent crude futures have given up all of the year’s gains.

Here is why:

Depressed demand for fuels

China is the world’s largest crude importer and second- largest oil consuming nation, second only to the United States.

But in 2022, strict government intervention to contain coronavirus cases starkly reduced industrial and economic output as well as demand for travel.

China’s measures depressed oil demand by as much as 30% to 40% in China, according to analyst estimates.

Europe’s winter started off mild, curbing demand for different fuels, including distillates like heating oil, used for power generation and heating homes. Overall economic activity also declined across the globe, most notably in China but also in the United States.

Higher rates and the dollar

To combat rising inflation across the world, central banks enacted a series of interest rate hikes intended to cool off the economy and the labor market. Rising interest rates increased the value of the US dollar, which pressured oil prices as a strengthening dollar makes the greenback-denominated commodity more expensive for other currency holders.

Supply fears were overblown opec+, which comprises the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, angered the United States and other Western nations in October when it agreed to cut its targeted output by 2 million barrels per day (bpd), or about 2% of world demand, from November until the end of 2023.

Oil dips, hits lowest since January as U.S. data fans fuel demand fears

OPEC+ said it cut output because of a weaker economic outlook, but the move did not shore up prices. About half of OPEC’s cut was on paper only, as the producing group has been routinely falling short of its targets.

Meanwhile, US production has picked up. Domestic output has grown slowly, but it recently hit 12.2 million barrels per day, the highest since the first wave of the coronavirus pandemic in March 2020.

The market’s rally was also built in part on fears that a series of sanctions imposed on Russia by European nations and the United States would throttle that nation’s supply.

While production in Russia has declined, it has not fallen as fast as anticipated. Earlier this week, G7 democracies and Australia imposed a $60-per-barrel price limit on seaborne Russian crude to hamper Russia’s ability to fund the military offensive in Ukraine.

However, Russian oil is already trading at a discount, making it less likely that the move will disrupt markets.

Speculators flee

Hedge funds and other money managers built big positions in crude contracts in the wake of Moscow’s invasion, but have swiftly exited the market, removing some of the support for oil’s rally.

US data shows that hedge funds’ net long position in Brent crude contracts is near its lowest level over the past 10 years, and the ratio of long positions to short positions is at its lowest since November 2020.

Comments

Comments are closed.

Muhammad Kashif Dec 09, 2022 01:41pm
The sanctions of western countries are not working on Russia. The western countries have wealth so they are bearing the brunt of high energy cost but poor countries like Pakistan are undergoing extreme hardships.
thumb_up Recommended (0)