Oil prices declined on Tuesday, dropping to the lowest level of the past two weeks with demand concerns due to ongoing coronavirus restrictions in the world’s second-largest oil consumer China, coupled with a rise in the US dollar index that is making dollar-priced oil more expensive for buyers.
International benchmark Brent crude was trading at $105.31 per barrel at 0659 GMT for a 0.59% decrease after closing the previous session at $105.94 a barrel.
American benchmark West Texas Intermediate (WTI) was at $102.59 per barrel at the same time for a 0.48% loss after the previous session closed at $103.09 a barrel.
Brent fell to the lowest level in the past two weeks to $102.60 a barrel during the previous session due to rising demand worries as millions of Chinese people in Shanghai, Beijing, and elsewhere face strict lockdowns.
Read more: Oil prices drop after China releases reserves of gasoline, diesel
China’s export growth dipped to single digits, the slowest in two years, as the country tightened its controls to combat the spread of COVID-19.
Amid geopolitical tension due to the Russia-Ukraine war and China’s ongoing strict pandemic measures, rising fears of high-interest rates hindering economic development are also threatening investor appetite for risk.
Oil prices declined, dropping to the lowest level of the past two weeks with demand concerns due to ongoing coronavirus restrictions in China, coupled with a rise in the US dollar index that is making dollar-priced oil more expensive.https://t.co/ijs0oFS5EB
— Sibel Morrow (@SibelMorrow) May 10, 2022
The US dollar index is also placing more pressure on dollar-indexed oil prices. The index, which measures the value of the American dollar against a basket of currencies including the Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, reached as high as 103.77 before falling back to 103.59.
Lingering EU sanctions on Russian oil
Global oil markets have come under supply pressure since the beginning of the Russia-Ukraine war on Feb. 24. Western countries continue slapping Russia with numerous sanctions to cripple the country’s economy, the latest of which is likely to target Russian oil exports.
However, negotiations among EU member states about the sixth sanctions package against Russia, which includes, among others, a ban on Russian oil imports, have stalled after Hungary, Slovakia and the Czech Republic, which are highly dependent on Russian energy imports, raised concerns about the European Commission’s sanctions proposal and asked to opt out.
Although the draft offered a phase-out period for Hungary until the end of 2024, the Hungarian government has been adamant and the most vocal among others in its rebuttal of the oil embargo.
Read more: EU ready to slap new sanctions on Russian oil as Ukraine war worsens
Bulgaria likewise said on Sunday that it would not support the bloc’s new set of sanctions against Russia if the Balkan country does not get an exemption from the proposed ban on buying Russian oil.
Following pressure from Greece, Cyprus, and Malta, the new version of EU sanctions is also expected to lift the restriction on EU tankers carrying Russian oil.
Anadolu with additional input by GVS News Desk