Oil Down 6% On The Week As Trading Increasingly Driven By Panic Headlines

Meanwhile, Goldman Sachs outlines inflation risk for Europe if Russia turns off the taps: File Image/Pixabay

Friday's crude trading saw prices settling 3.1 percent higher higher but West Texas Intermediate and Brent posting weekly falls of 5 and 6 percent – the steepest weekly decline since November – after rising 20 percent last week.

WTI settled at $109.33, and Brent settled at $112.67 per barrel; crude prices remain more than 40 percent higher for 2022 so far.

Willie Delwiche, investment strategist at All Star Charts, pointed out that uncertainty about the next developments in the Russia/Ukraine war and what steps the U.S. Federal Reserve will take next in response to skyrocketing inflation will likely kept investors in a selling mood.

He said, "This remains a headline-driven market: we're in this environment where you get these exaggerated day to day swings, but you don't make any progress."

Tariq Zahir, managing member of the global macro program at Tyche Capital Advisors, addressed the unprecedented market volatility by noting that "Volatility is not going to disappear anytime soon" and that $10-$15 increases can happen at the "blink of an eye" due to a tight market and geopolitical risks.

Implicit in both comments is the notion that actual supply and demand ratios are so far acceptable globally; indeed, the Organization of the Petroleum Exporting Countries (OPEC) has repeatedly stressed there are no shortages, even though mounting sanctions against Russia have kindled fears that a tight oil market may be stretched further due to the absence of that country's 5 million barrels of oil exports.

But that is not to suggest that activity is sedate, far from it: it was reported on Friday that bookings to fill oil tankers with refined fuels - mostly diesel, gasoil and jet fuel - and sail them from East to West have soared in recent days, according to a ship broker and a large vessel owner.

Per Heilmann, head of freight trading at Maersk Tankers, said, "We see Arabian Gulf to Europe opening right up on gasoil and jet fuel as well; the market pricing is saying bring the lost supply to Europe from elsewhere."

Weekly bookings to ship clean petroleum product out of the Middle East or India have surged to 29 tankers hauling a combined 1.68 million tons, more than double the year-to-date average, according to E.A. Gibson Shipbrokers Ltd.

Meanwhile, jittery analysts continue  to project possible outcomes of Russian president Vladimir Putin's invasion of Ukraine: Goldman Sachs on Friday pointed out that if the former Soviet Union  halts its exports to Germany and the rest of Europe via the Nord Stream 1 pipeline, it could have significant knock-on effects for euro zone economic output and inflation.

The bank stated, "If gas prices rise further due to gas pipeline flows from Russia being shut down, our headline inflation forecast could be up to 1.3 percentage points higher, with likely also significant pass-through into core prices."