Oil prices fell 5.5% on expectations of reduced demand in China and Fed rate hike
The US Federal Reserve's intention to raise interest rates 25 basis points above 5% to curb inflation is sending stock and commodity markets into a frenzy, reducing speculative demand and prices for oil and commodities, including grains and oilseeds.
In addition, the market is pressured by an unexpected decline in the index of manufacturing activity in China in April, as well as information about the increase in oil exports by Russia, contrary to the statements of the pr. reduction in production and sales.
According to Bloomberg, in recent weeks the Russian Federation has increased its seaborne oil exports to a record 4 million barrels/day (since the beginning of the full-scale invasion of Ukraine, supplies have exceeded this figure only once). The reduction in oil production in the Russian Federation announced at OPEC+ two months ago has not yet been confirmed, while the country's authorities classified data on production and export of oil and oil products.
India remains the main buyer of Russian oil, and buys more of it than Saudi Arabia and Iraq combined, although they were the main suppliers of oil to the country last year.
Despite the increase in the supply of oil from the Russian Federation to India, its price has decreased to a record. If last year India bought Russian oil at $118/barrel, then in February it was already at $72.14/barrel, and in March – at $70.18/barrel.
Yesterday, July Brent oil futures on the London ICE exchange fell by 5.3% to a 5-week low of $75.3/barrel (-12.2% for the month), and WTI oil on the New York exchange – by 5.6% to $71.5/barrel (-12% for the month).
Following them, the prices of Russian Urals oil, which is officially sold at $60-62/barrel, but in fact much cheaper, as the Russian Federation lost the European market due to sanctions and is forced to sell oil to Asia at a large discount, fell.
Falling oil prices will weigh on palm oil, which on Bursa Malaysia, after falling 11% last week, recovered 2.2% yesterday to RM3,421/t or $768/t (-8.2% in two weeks).
The palm oil market is under pressure from a significant decline in exports from Malaysia in April by 18-21%, amid increased exports from Indonesia, which rose after the authorities reduced the limit of mandatory sales in the domestic market.
July soybean oil futures on the Chicago Stock Exchange traded at $1,138/t this week (-1% for the week, -9.8% for the month). They are supported by strong demand for meal and oil in the US, driven by tight supply and buoyant soybean exports, as Argentina cuts supplies sharply this year.
Sunflower oil prices also remain under the pressure of low demand and are $975/t with delivery to buyers, but in Ukraine they have fallen to $780-820/t with delivery to the port, while demand from EU countries is practically absent.
