Oil prices extend losses and fall more than 5% mid-session


The oil prices they lost more than 5% on Monday, weighed down by fear of a drop in demand due to sanitary measures in China to combat Covid-19.

Around 15:25 GMT, oil Brentthe European benchmark, fell 5% to 106.77 dollars a barrel in the London market.

For its part, the US WTI lost 5.37% to settle at 103.87 dollars in the New York market.

While the six-month Brent crude oil spread has risen to its highest level since March, as the European Union’s plan to ban Russian oil imports points to a tighter market, with analysts saying the spread could widen even more.

the structure of backwardation, when spot prices are higher than later prices, it usually indicates a short-term supply shortage. The six-month spread reached $11.67 a barrel on Friday, its highest level since March 30, and approached that figure on Monday.

The European Union executive proposed new sanctions against Moscow on May 4, and the bloc’s governments are close to agreeing on measures that include a ban on buying Russian oil. More talks will be held on Monday.

“Without a doubt, the looming EU ban on Russian oil imports is behind the strengthening of longer-term contracts,” said Stephen Brennock of oil brokerage PVM.

There is scope for longer-term backwardation to widen further if China and India agree to Western demands to limit their consumption of Russian crude.”

The spread hit a record high of $22.87 on March 8 after the Russian invasion of Ukrainewhich aggravated concerns about existing supply, and the price of Brent soared that same day to exceed 139 dollars per barrel, the highest since 2008.

Both the differential and prices have fallen as a result of the International Energy Agency’s decision to release oil from strategic reserves, in addition to the release by Washington, as well as concerns about slowing economic growth and the oil demand.

However, Rystad Energy’s Bjørnar Tonhaugen also said an EU ban would offer more support to the market structure.

The Russian oil embargo being considered by the EU would strain world oil markets and change trade flows in an unprecedented way,” he said.

“We expect to see some more bullish backwardation for the summer months contracts once the policy is voted into law.”



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