(The views and opinions expressed in this article are those of the attributed sources and do not necessarily reflect the position of Rigzone or the author.)
In this week’s edition of oil and gas industry hits and misses, one of Rigzone’s regular market watchers looks at oil market weakness, the renewed focus on China reopening from its zero Covid policy, European sanctions on Russian crude production and exports, and more. Read on for more detail.
Rigzone: What were some market expectations that actually occurred during the past week – and which expectations did not?
Vikas Dwivedi, Global Oil and Gas Strategist for Macquarie Group: The markets started the week with a strong, risk off sentiment which accelerated the down move in oil. The weakness in oil was also driven by the continuing oversupply of sweet crude in the North Sea and West Africa markets.
Rigzone: What were some market surprises?
Dwivedi: The market’s renewed focus on China’s reopening from its zero Covid policy. The market began pricing in the risk that the reopening has the potential to reduce Chinese petroleum demand before it helps improve demand. Presumably, after infections peak and the Chinese economy is fully reopened, the benefits to demand will become more apparent. For now, the market is watching a large increase in Covid cases in China and extrapolating what the rise in cases may mean for petroleum demand.
Rigzone: What developments/trends will you be on the lookout for next week?
Dwivedi: The market will be watching for updates on China’s reopening as well as looking for hard data points on how the global recession may be reducing oil demand as well. Also, for next week, there will likely be a revisit of how European sanctions are impacting Russian crude production and exports. We are not expecting the sanctions to alter Russian supply.
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