Oil Slips Amid Financial Market and Demand Concerns

By David Ho

Oil prices declined on Tuesday morning in Asia as concerns regarding demand outlook emerged, particularly due to lockdowns in China, the top oil importer, and increasing economic tensions in Europe.

Prices fell 0.87% to $105.02 while the other major benchmark decreased 0.84% to $102.22.

Financial markets are reflecting anxieties that sanctions on Russian oil imports following its invasion of Ukraine might lead to economic hardship for some European countries.

Last week, the European Commission proposed a phased embargo on Russian oil, which initially resulted in a rise in Brent and WTI prices. However, for the proposal to be enacted, it requires a unanimous vote from EU member states this week.

A potential halt of Russian gas supplies to Germany could spark a severe recession, potentially costing up to half a million jobs, according to a senior economist’s projections made on Tuesday.

Reports indicate that German officials are preparing for an abrupt cessation of Russian gas supplies, potentially implementing an emergency package that could involve seizing control of critical companies.

Hungary has reiterated its stance, stating it will not entertain new sanctions against Russia until its own concerns are addressed.

Global financial markets are also grappling with fears of interest rate hikes alongside recession worries. The COVID-19 situation in China has already contributed to a slowdown in growth for the world’s second-largest economy.

Crude imports to China in the first four months of the year fell by 4.8% compared to the previous year; however, imports in April saw a nearly 7% increase.

Additionally, Wall Street’s stock indexes declined on Monday as the dollar reached a two-decade high, making oil prices more expensive for buyers operating with other currencies.