Crude Oil Weakens on Demand Fears; Putin Warnings Have Limited Impacts

By Peter Nurse — Oil prices fell Wednesday as concerns of sluggish global demand outweighed warnings from President Vladimir Putin about the potential withdrawal of all forms of Russian energy.

By 09:05 ET (13:05 GMT), futures traded 1.5% lower at $85.62 a barrel, while the contract fell 1.5% to $91.44.

U.S. were down 0.3% at $2.4089 a gallon.

Oil prices have been on the wane of late, with new COVID lockdowns in China, one of the biggest sources of concern for crude demand, after the government recently extended a lockdown in the Southwest city of Chengdu.

China is the largest importer of crude in the world, and these lockdowns are likely to curb people movement and curtail economic growth, hitting demand for energy.

Data released Wednesday showed that Chinese crude oil imports fell 9.4% in August from a year earlier.

Also weighing on sentiment is the likelihood that the will hike again on Thursday as it tries to combat at historic highs, even as growth in the region slows.

dropped 0.3% on the month in July, data released Wednesday showed, illustrating that the outlook for Europe’s largest economy continues to darken in the wake of the Russian invasion of Ukraine in February and the associated regional energy crisis.

The Saudis released their official selling prices for October and there were some fairly large cuts for Asia and Europe, indicating weaker anticipated demand.

This negative sentiment surrounding global demand has meant that strongly worded warnings from Russia’s President Vladimir Putin that he would withhold all forms of his country’s energy from “unfriendly” countries had a limited impact.

“We will not supply anything at all if it is contrary to our interests, in this case economic [interests],” Putin told a conference in Russia’s Far East. “No gas, no oil, no coal, no fuel oil, nothing.”

European Union energy ministers are set to meet later on Friday to discuss extraordinary measures to curb surging energy prices, including potentially setting a limit on the price of Russian .

“While price caps may offer some much-needed relief in terms of prices, it will do little to help balance the market through demand destruction,” said analysts at ING, in a note.

Additionally, the decision of the Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+, to cut output by 100,000 barrels a day has had very little impact on the market.

“While on paper the cut is small, in reality, it is even smaller, given that most OPEC+ members are already producing below their target production for October,” ING added. “If this downward pressure continues we cannot rule out OPEC+ holding an emergency meeting, which they have made very clear could happen if necessary.”

The will update on U.S. supply-demand balance at 16:30 ET, a day later than usual due to the Labor Day holiday, which typically signals the end of peak summer demand in the U.S.

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