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Crude oil slipped more than 2% Tuesday, as the market quickly surrendered Monday’s modest gains and discounting any meaningful supply risk related to the weekend’s chaotic events in Russia.
Russian crude exports have been topping expectations during the past year as the country continues to find buying interest from China, India and elsewhere to counter lost market share in the U.S. and European Union.
Front-month Nymex crude oil (CL1:COM) for August delivery closed -2.4% to $67.70/bbl, its fifth lowest settlement value this year, and August Brent crude (CO1:COM) ended -2.6% to $72.26/bbl, its second lowest settlement YTD.
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“It’s going to take a lot to change the minds of energy traders,” OANDA’s Edward Moya wrote. “Fears of a weaker global growth outlook are not going away anytime soon.”
Russia is on the cusp of overtaking Saudi Arabia as the biggest oil supplier to China, thanks to Russia selling oil at steep discounts.
Shipments from Russia now account for 14% of Chinese supplies in the three months to May, up from 8.8% before the Ukraine war, while Saudi Arabia’s share fell to 14.5%, according to commodity data provider Kpler, which also says Russia now accounts for ~0% of India’s imports, up from 3% before the war.
The flood of cheap Russian oil has helped depress global prices, rendering Saudi Arabia’s surprise move earlier this month to slash an additional 1M bbl/day of oil in an effort to jolt prices higher as a failure, at least so far.
However, a boost in Chinese demand in Q3, which is forecast by many analysts, likely would push prices higher and vindicate the Saudi move to curb production.
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