More Losses For Oil As Russia's Crude Stocks Reportedly Stronger Than Ever

Meanwhile, a dramatic plunge in Covid illnesses and death in China is overlooked: File Image/Pixabay

A roller coaster week of oil trading driven by traders fluctuating between optimism over demand growth and fear that inflation would erode the growth was capped on Friday by a decline in prices, due to news of strong oil supply in Russia offsetting earlier excitement over bullish U.S. economic growth data.

Brent settled down 81 cents at $86.66 per barrel and West Texas Intermediate settled down $1.33 at $79.68 after calculations showed that oil loadings from Russia's Baltic ports are set to rise by 50 percent this month from December, as sellers try to meet strong demand in Asia.

It was also estimated that Urals and KEBCO crude oil loadings from Ust-Luga over Feb. 1-10 may rise to 1.0 million tonnes from 0.9 million.

John Kilduff, founding partner at Again Capital, said, "If Russian supply remains strong heading into next month, oil is probably going to continue to trend lower."

Largely overlooked by cautious traders on Friday was news regarding their major source of optimism, China: critical Covid-19 cases are down 72 percent from a peak early this month, and daily deaths among Covid patients in hospitals have dropped by 79 percent from their peak.

Not only does this lend credence to critics' claims that lockdowns were pointless (the plummet in cases occurred after they were abandoned), it also heralds a normalization of the Chinese economy and a recovery in oil demand.

Also on Friday, European Union diplomats on Friday began discussions about how to further curb Russian revenues from exports of oil and petroleum products in retaliation for the former Soviet Union invading Ukraine.

A review of its recently imposed crude price cap was included in the talks, and a coalition led by Estonia, Lithuania, and Poland is pushing to lower the cap, which they say is too high compared to current market prices.

The countries stated in a document seen by Bloomberg News, "Although the price cap has shown first steps that it works, it is clearly not enough and we should exploit this mechanism further.

"As Russia is planning new attacks against Ukraine, it is of utmost importance to put stronger pressure on Russian economy and cut off its revenues."

Looking forward to probable crude trading influences, delegates from the Organization of the Petroleum Exporting Countries (OPEC) will meet next week to review production levels, and the expectation is that no changes will be made to the present policy.

Also, the U.S. Federal Reserve will decide whether or not to hike interest rates again when it convenes over Jan. 31 and Feb. 1.