Oil is declining sharply on Monday due to expectations of falling demand for energy resources in China. Thus, June futures on Brent crude on London's ICE Futures exchange is estimated at $101.37 per barrel today, down by 4.49% from the previous session's close. The price of WTI futures for June on NYMEX electronic trading is $97.42 per barrel, which is 4.42% lower than the result of the previous trading. According to last week's results, the price of benchmark Brent crude fell by 4.5% and WTI crude dropped by 4.1%.
China's largest city and financial center, Shanghai, reported a record number of new COVID-19 cases in the past two days - 39 deaths. The total number of deaths among those infected in this city with a population of 25 million people now stands at 87. The first deaths in Shanghai were reported on April 18. A lockdown was imposed in Shanghai on March 28, with most businesses shut down, markets and stores closed and residents locked in their homes and apartments. The population in Shanghai is daily tested for COVID-19 and those who test positive are sent to isolation centers.
Lockdown in Shanghai strongly affects global markets, as huge batches of Chinese components due to idling in factories and plants simply cannot reach production facilities in other countries.
The lockdowns fully affected the demand for gasoline, diesel, and jet fuel, which in China in April is likely to fall by 20% on a yearly basis. According to Bloomberg, the fuel price drop only for the current month has all chances to reach 1.2 million barrels per day. If this forecast comes true, the drop will be the most rapid since the beginning of the COVID-19 pandemic in the Chinese city of Wuhan more than two years ago.
In the light of Russia's rapidly developing military action in Ukraine, the situation in the oil markets is getting much worse. However, the disrupted global supply chain system, skyrocketing inflation, and acute shortages of energy resources were observed in the world even before the Russian special military operation, which has only worsened the prospects and made it impossible to find a quick way out of the current situation.
However, according to some experts, the conflict in Ukraine will end sooner or later, after which the global commodity market will return to its normal pre-crisis state. For example, analyst Michael Lynch reported in Forbes magazine that Russia's military operation will definitely end. The oil market will no longer have reason to worry, and it is sure to return to normal, and fuel prices will fall to quite acceptable levels. Analysts believe that the situation will be normalized by the lifting of sanctions against Russia. The return to the normal operation of the energy market is probably the main condition for Western European countries to maintain their economies and their usual standards of living.
However, the lifting of sanctions is a forced measure for the political elites of the European Union, but not for the United States. US Secretary of State Anthony Blinken, who has repeatedly stressed in his speeches that it did not matter to his country whether Russia ends its military operation or not, the sanctions against it would not be lifted by the United States anyway.
Oil Price reported that the long duration of today's stalemate increases the chance that there would be no return to the old pattern. For example, the fact that Europe is shifting from pipeline gas to liquefied natural gas and that Russian exports are shifting to Asian markets is irreversible. In this regard, the prognosis so far is disappointing for buyers: high oil prices promise to remain so for a long time.
