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The Volatility of Global Oil Market amidst Economic and Political Uncertainties.

Harvest Global Markets :

The geo-economic and geo-political uncertainties have increased volatility in theglobal oil prices. Major concerns have been over the tightening supply that offset the destructive impact of uncertain demand, and the news that the United States will release more crude from its Strategic Petroleum Reserve (SPR). The prices have plummeted even more, in fears of more aggressive hikes in U.S. interest rates in the near term.

China, the second major oil consumer, is still not operating its industries in full capacity and the demand has been squeezed by mounting COVID-19 cases. China reported rising consistent COVID-19 infections and Chinese refiners have asked to cut Saudi crude volume in Decemberwhile also reducing Russian crude purchases.

In addition to this, The European Unionhas announced to ban on Russian crude imports effective from Dec. 5 and Russian oil products from Feb. 5. In retaliation, Russian oil output is set to fall by 1.4 million barrels per day(BPD) next year. The move to deprive Moscow of revenue will create more uncertainty for oil markets and add pressure on prices, including diesel. For now, despite the fact that Russia has been subject to a wide range of sanctions as a result of Vladimir Putin’s illicit invasion and partial invasion of Ukraine, most of them have been comparatively ineffective.

On the contrary, the US administration plans to sell 15 million barrels of oil from its reserves, the final tranche of the 180 million barrels release announced earlier this year. However, Oil gained backing from official figures showing U.S. crude stocks fell by a bigger-than-expected 5 million barrels in the latest week.


OPEC+, which began a new round of supply cuts in November, holds a policy meeting on Dec. 4, and possibilities of a single direction for the oil market may be expected thereafter.

 

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