Choose country & language:

Oil prices rise on China's demand expectations

Home >  Daily Market Digest >  Oil prices rise on China's demand expectations

Written by:
Myrsini Giannouli

17 May 2022
Share the article

Oil prices exhibited high volatility last week, dropping sharply at the beginning of the week, but rallying towards the end of the week. On Monday, WTI climbed above $113 per barrel, on expectations of increased demand in China. If the WTI price drops, support can be found at the $94.5 per barrel level and further down at the $90 per barrel level, while further resistance can be found near $118.3 per barrel. 

Oil prices are especially volatile, as competing factors affect oil supply and demand. Stalling global economic growth and lockdowns in China have reduced demand. China is the largest importer of crude oil and continuing Covid lockdowns have dampened oil demand, pushing prices down. The zero-Covid lockdown rules, especially in Shanghai, have fuelled concerns of a slowdown in the world’s biggest importer of crude. 

As Covid cases are starting to fall in China, however, fears of prolonged lockdown ease, drive oil prices back up. On Monday, news of reduced Covid cases in Shanghai fuelled optimism that the large financial centre would soon reopen. Health authorities in China have signalled that lockdown restrictions in Shanghai will start easing from May 21st and will end on June 1st. Even though many other cities in China are under strict lockdown, news of the end of the lockdown in Shanghai brought oil prices up. The end of pandemic restrictions in China would increase oil demand once more, driving oil prices further up.

The crisis between Russia and Ukraine has been intensifying concerns of disruptions in oil distribution, supporting oil prices. The US has already banned all oil and gas imports from Russia, with as many as 3 million barrels per day of Russian crude oil potentially removed from the market as a result of sanctions and of boycotting of Russian oil. 

The EU has drafted a new package of Russian sanctions, including a ban on Russian oil crude imports. Even though the ban, if implemented, will likely throw the Eurozone into an energy crisis, it will likely not take effect for some time. The EU is hesitant to cut off Russian oil imports abruptly, as most EU member states are in favour of gradually weaning off Russian oil imports. If approved, the EU ban will likely result in phasing out Russian oil imports over the next six months to a year. EU’s Russian oil sanctions have stalled though, as some EU member states, such as Hungary, Slovakia and Bulgaria, oppose the ban and are threatening to veto the plan. 

Russia is retaliating against the EU however, by limiting Natural Gas exports to Europe. This strategic move has exasperated the EU’s energy problem, with Europe's gas prices skyrocketing, further adding to inflationary pressures in the Eurozone.

WTI 1hr chart

TRADE WTI

The content provided in this material and/or any other material that this content is referred to, whether it comes from a third party or not, is for information purposes only and shall not be considered as a recommendation and/or investment advice and/or investment research and/or suggestions for performing any actions with financial products or instruments, or to participate in any particular trading strategy and cannot guarantee any profits. Past performance does not constitute a reliable indicator of future results. TopFX does not represent that the material provided here is accurate, current, or complete and therefore shouldn't be relied upon as such. This material does not take into account the reader's financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of TopFX, no reproduction or redistribution of the information provided herein is permitted.

Written by:
Myrsini Giannouli

Share the article:

Latest news

Dollar rallies on increased risk aversion sentiment

Myrsini Giannouli 29 June 2022

Gold slides as dollar rallies

Myrsini Giannouli 29 June 2022

Oil prices rise as G7 considers a price cap on Russian oil

Myrsini Giannouli 29 June 2022

Bitcoin plummets on increased risk-aversion sentiment

Myrsini Giannouli 29 June 2022

Why TopFX

10-years

10-years

industry presence
as a Liquidity Provider

Spreads

Spreads
from 0.0 pips

and reliable execution

Segregated

Segregated

client funds

First-class

First-class

customer support

Open your Live Account in 3 Steps

Step 1

Fill in the registration
form and click
"Create account".

Step 2

Once you are in the client secure area, please proceed with uploading your Proof of Identity and Proof of Residence.

Step 3

When your live account is approved, you can deposit funds and start trading on your chosen platform!