The movement of the price of the ICDX Crude Oil contract fell almost 7 percent, weighed down by negative sentiment that suppressed the demand side, namely the increasing spread of Covid in China has the potential to cause a decline in oil demand from the world's first largest oil importing countries.
Meanwhile, on the supply side, there is also optimism that Middle Eastern oil producers will increase their production along with the working visit of US President Joe Biden to Arab Saudi. This optimism was also strengthened by the Ministry of Foreign Affairs of Japan (21/7) which stated that Japan and Saudi Arabia agreed to cooperate in efforts to stabilize the global oil market, including cooperation in increasing additional oil supplies from OPEC and its allies.
However, support for the oil market came from signals that Russia was starting to cut gas supplies to Europe via the Nord Stream 1 pipeline, sparking fears of a potential further gas crisis in the region. Previously, Russia's Gazprom had lowered its Nord Stream 1 capacity to 40% of normal capacity in June and continued with 10 days of maintenance starting July 27, meaning supply would be completely cut off during scheduled maintenance.
The OPEC+ Meeting Will Determine The Future Direction Of The Oil Market
OPEC and its allies are scheduled to meet on August 3 to discuss oil market conditions and are expected to provide an indication of OPEC+'s stance on the continuation of the production pact which will expire in September. The decisions taken at the meeting will affect the direction of the next oil movement because it will answer problems in the global market, especially related to supply problems.
Russian Oil Price Restrictions From Year-End
United States Deputy Secretary of The Treasury, Wally Adeyemo said on Wednesday (20/7) that the US hopes that the imposition of the Russian oil price cap can be imposed in December, along with the implementation of the European Union's sixth package of sanctions against Russia. The United States and its allies hope that imposing the price cap will help lower global energy prices and allow Russia to continue supplying its oil to the market. However, Russia has made it clear that it will not supply oil to countries that decide to impose price limits on Russian oil, said Central Bank Governor Elvira Nabiullina on Friday (22/7). Nabiullina also added that the price-limiting scheme would only spur world oil prices to soar higher, as it would force Russia to further reduce oil production, resulting in tighter supply in global markets.
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Source: ICDX Research