The oil market is torn by war and an epidemic. China is introducing a lockdown

The drop in the price of a barrel of WTI crude oil within a dozen or so days from 130 to less than USD 100 says a lot about the volatility that has recently characterized the market oil. It is still clashing in the mood about the escalation of the Russian attack on Ukraine and the hopes for a ceasefire. Now the coronavirus is coming back.

As Russian troops increasingly fiercely attacked targets in Ukraine at the end of February, the price of a WTI barrel rose in a few days to USD 130, the highest level since 2008. The market then seemed to be playing under an embargo on oil and gas supplies from Russia under economic sanctions on this country.

Lockdown in China

The days went by and the oil market was still lagging behind. However, the price was changing. Recent cuts may be related to concerns about a reduction in demand. China is closing its individual provinces and they put a lockdown due to the largest coronavirus outbreak in two years.

This increases the likelihood that China will consume less oil than in 2020. And as a result, with a steady supply and lower demand, the price of the WTI variety may be lower than at the beginning of this year. The market may also assume an increase in the chances of a ceasefire and an end to Russia's attack on Ukraine, which could bring some calming down on the oil market.

Price adjustment phase

It is possible that one of the unprecedented events of spring 2020 may have marked a key turn in the oil market. It was a time when the raw material in futures contracts was traded with negative prices, because contract holders preferred to pay extra for them and give them to someone else, rather than obliging themselves to bear the costs of storing oil that no one wanted to buy.

The outbreak of the war in Europe could be the second key turning point for this market, as the negative price has gone into a buying frenzy to its highest level since 2008. Thus, the full cycle of growth for black gold could have ended and the oil price could now shift to a fairly high level. variable, but still a correction. Perhaps the fluctuations will be large, but the direction may not be so clear-cut.