Oil set to end 2022 with gains despite fall in prices on China concerns

New Delhi: Global crude oil prices remained under pressure on Friday amid rising concerns overl demand following the fresh surge in Covid-19 cases in China.

Around 0400pm, the March Brent contract the Intercontinental Exchange traded at $83.10 per barrel, down 0.43% from previous close. February West Texas Intermediate (WTI) futures on the NYMEX fell 0.61% to $77.92 per barrel.

Despite the fall, oil prices were on track for ending years with gains amid volatility and supply concerns created by the Russia-Ukraine conflict.

For the year, Brent looked set to gain 8%, after jumping 50% in 2021. US crude was on track to rise 4.6% in 2022, following last year’s gain of 55%, according to a report by Reuters. Both benchmarks fell in 2020 as the pandemic hit demand.

Ravindra V. Rao, head of commodity research at Kotak Securities Ltd., said, “Crude oil is set to end the year 2022 with minor gains as it managed to hold on amid wild price swings. The year 2022 was expected to be a year when global market was expected to be well balanced. However, Russia-Ukraine conflict led to both demand and supply side repercussion.”

Since the second quarter of 2022, crude oil has largely remained under pressure as Russia-Ukraine talks continued while aggressive monetary policy tightening and fragile global economic outlook shifted the focus to demand concerns from supply tightness, he said.

“In 2023, we expect crude prices to stay volatile as demand recovery from China, Russia-Ukraine conflict, Russian response to price oil cap might support prices, whereas global recessionary fears might keep the gains in check amid demand concerns,” Rao added.

Rahul Kalantri, vice president for commodities at Mehta Equities, noted that along with demand concerns in the world’s second largest crude oil importer, a surprise build-up in oil stocks in the US has also weighed on prices.

According to US EIA weekly inventory data, crude oil inventory increased by 718,000 barrels for the week ended 23 December against expectations of a decline of 1.5 million barrels.

Going ahead, volatility is expected to continue with the geopolitical concerns involving Russia, persisting supply concerns, and rising Covid cases globally.

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