Crude oil prices fell on Tuesday’s deal, despite the European Union’s potential oil ban on Russia, due to demand concerns from China and sluggish manufacturing activity data.
Brent crude July futures were trading at $ 106.10 a barrel after hitting a high of about $ 108.30 per day at 09:57 UTC on May 3. The current downward pressure on oil prices was due to concerns about the situation in China’s COVID-19. Dozens of Chinese cities remain under partial or complete blockade due to the COVID-19 case and the strict zero COVID policy of the Chinese government.
With hundreds of millions of people trapped in their homes, public consumption is being adversely affected, forcing experts to curtail China’s growth forecasts.
China is the largest consumer of crude oil, and signs of weakening demand negatively impact prices. Beijing, the capital of the country, is testing a large number of citizens to avoid a blockade similar to that imposed in Shanghai last month.
The National Bureau of Statistics (NBS) released the country’s April Purchasing Managers Index (PMI) data on Saturday, a disappointing result. China’s April PMI fell from 49.5 in March, the second consecutive month of contraction, to 47.7 in April.
This is also the lowest level since February 2020. PMI is a measure of the ongoing direction of economic trends in the manufacturing industry.
According to NBS, the COVID-19 turmoil played an important role in reducing supply and demand in the manufacturing industry. “Some companies are struggling to supply key raw materials and parts, sell finished products, and increase inventories,” says NBS. Reuters..
A survey of Chinese private companies by media group Caixin showed that factory activity shrank at the fastest pace in 26 months. The export order index has fallen to its lowest level since June 2020.
Meanwhile, the European Commission is reportedly preparing a sixth package of sanctions against Russia’s invasion of Ukraine. It provides support for oil prices. Sanctions expected to be proposed this week could include an embargo on Russia’s oil purchases. Moscow accounts for 26 percent of EU oil imports.
The move to limit Russia’s oil imports came as the Kremlin refused to pay the Russian ruble after the Kremlin cut off gas supplies to Poland and Bulgaria.
“Paying the ruble through a conversion mechanism controlled by a Russian public agency and a second dedicated account at Gazprombank is a violation of sanctions and is unacceptable,” said Kadrisimson, EU Energy Commissioner. Press conference After the EU Ministerial Meeting on Monday, according to Reuters.
The European Commission may escape Slovakia and Hungary from the proposed Russian oil embargo as countries rely heavily on Moscow fossil fuels. According to the International Energy Agency, Slovakia received 96 percent of crude oil and petroleum product imports from Russia last year. In Hungary, that number was 58 percent.
Germany, the largest purchaser of Russian oil in the coalition, has shown that it may control Russia’s oil embargo. In 2021, Germany imported 35% of its crude oil from Moscow, which has dropped to 12% in recent weeks.