International oil prices will still face heavy selling pressure, Russia is struggling to find new buyers
On Thursday (January 5), international oil prices rebounded, but compared with the huge decline in the previous two trading days, the global economic outlook is worrying, which limits the recovery of oil consumption. Russia does not hesitate to bear higher transportation costs to find new buyers eastward. These have brought heavy selling pressure to the market.
At 16:16 Beijing time, NYMEX crude oil futures rose 0.99% to $73.54 a barrel; ICE Brent crude futures rose 0.85% to $78.49 a barrel. The cumulative decline of the two cities in the first two trading days exceeded 9%, which was the largest decline in the first two trading days of each year since 1991.
Economic data from the United States weighed on oil prices. The U.S. manufacturing sector contracted further in December, with the Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI) falling for a second straight month to 48.4 from 49.0 in November. This is the lowest reading since May 2020, the ISM said.
Jun Rong Yeap, market strategist at IG, said: “Oil prices appear to be trying to ease the pressure following a massive sell-off, but the U.S. manufacturing PMI contracted for the second month in a row, reflecting a continued slowdown in economic activity, which might force Buyers shy away from participating in the market.”
Fed officials and economists have long argued that easing pressure on supply chains is key to falling inflation back to its 2% target. Significant improvements in supply and weakening demand have translated into lower commodity prices. Economists expect commodity deflation this year. But at the same time, a survey by the U.S. Department of Labor showed that job vacancies in the United States were larger than expected in November, and the previous value was revised upwards. The market is worried that the Fed will use the continued tight labor market as an excuse to maintain high interest rates for a longer period of time.
Russia is exporting more Arctic-produced crude to buyers in Asia at steeper discounts following Europe closed its doors to Russian supplies last month, trade sources and data show.
Russian Arctic crude oil brands Arco, Arco/NovyPort and Varandey do not normally export east due to geography, but following Western sanctions imposed they had to incur higher shipping costs to attract new buyers.
Russian Arctic crude oil exports to India have grown steadily since May, with loadings hitting a record 6.67 million barrels in November and 4.1 million barrels in December, the data showed. India imported its first shipment of Varandey crude last week and the cargo was loaded at the port of Murmansk in late November, the sources said.
