Price Performance Indicators

• In a week (2/1 - 6/1) the price of ICDX’s crude oil edged down 8.45 percent.   
• The highest volatility reached 4.47 percent. 

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Market Review

Starting the year of 2023, the price of the ICDX crude oil contract was observed to have weakened by 8.45% to a price level below $80 per barrel. China's decision to lift Covid restrictions in full on January 8, was met with opposition from various countries such as the European Union (EU), the US, France, Italy, Qatar, Japan and South Korea, by requiring pre-departure Covid tests for tourists from China. This sparked concern that it would impact travel activities from China to other countries.

Adding to pressure on black gold prices, Saudi Aramco cut down the selling price of oil destined for Asia for February delivery to the lowest level since November 2021. Apart from Asia, Aramco also reduced prices for destinations in northwestern Europe and the Mediterranean region. The decision from Aramco indicates sluggish market demand and the potential for excess supply in the Asian market, considering that Russia also diverted oil supplies from Europe to Asia after the imposition of the embargo and price limits from the EU and G7.

Meanwhile, positive sentiment comes from an estimate of the total number of passenger trips by land, rail, ship, or flight in China during the Chinese New Year holiday which could reach 2.1 billion, or double the number from the same period in 2022. 1.05 billion. From air travel activity, the daily flight schedule during the 40-day holiday which started Saturday (7/1), was reported to reach an average of around 11,000 flights, or about 73% of the flight rate in 2019 before Covid, China traffic officials said in Friday (6/1).

Market View

US Strategic Oil Reserve Stock Critical Situation

At the end of March 2022, US President Joe Biden, in order to reduce the surge in gasoline prices after the Russian invasion of Ukraine, finally decided to release oil sales of 180 million barrels taken from oil in the State Strategic Reserves (SPR). At the end of 2022, the US Department of Energy said it would make purchases to fill a shortfall in oil stocks of 180 million barrels, provided that oil prices drop to around $67-$70 per barrel. However, recently (6/1), the US Department actually rejected the first batch of offers from oil companies to supply small quantities of oil to the SPR in February, even though according to the latest records stockpiles at the SPR had shrunk to their lowest level since 1984. The situation this suggests the SPR has the potential to remain below normal levels for quite a long time. In addition, with the increase in exports of crude oil and fuel to Europe after February 5, it is not impossible that the SPR shortage situation will actually push energy prices even higher.

G7 Prepares 2 Segment Price Limits for Russian Oil Derivatives

Approaching the imposition of the Russian oil-derived product embargo on February 5, the G7 countries plan to apply price limits which are divided into 2 product segments, namely for diesel and crude oil, and other segments for oil-derived products that are cheaper such as fuel. Until now, the G7 has not agreed on specific tariffs that will be applied and are still being negotiated. Many experts believe that the next round of sanctions will force Russia to reduce production by at least 1 million bpd, where this situation has the potential to trigger turbulence in the global energy market, which will lead to a resurgence in energy commodity prices.

WEEKLY ECONOMIC DATA & EVENTS CALENDAR

Source: ICDX Research