What drove the three-day rout in crude oil

Since our latest crude oil update where we highlighted the downside risks driven by the collapsing risk appetite, we have seen some considerable downside moves across growth and demand depending on commodities, from crude to copper and cotton. As the banking crisis which started last week in the US spread to Europe and Credit Suisse on Wednesday, the need to reduce across market exposure accelerated.

In terms of oil demand, we are currently seeing a widening gab Western nations and Asia, especially China which continues to recover from its extended lockdown period. In their latest oil market report OPEC lower its demand for forecast for OECD countries while raising its demand for non-OECD countries, including China and India. Overall, the group stuck with its call for global demand to rise by 2.3 million barrels a day this year to 101.9 million barrels a day. A projection that is being based on global growth of 2.6% this year, with China’s economy growing by 5.2% while the Eurozone and the US economies will be bumping along at much slower pace of 0.8% and 1.2% respectively.

The IEA followed up on Wednesday by saying that global oil stockpiles have risen to the highest in 18 months with Russia managing to maintain production of its sought after heavily discounted oil by refineries, especially in India and China. However, “It remains to be seen if there will be sufficient appetite for Russian oil products now that the price cap is in place or if its production will start to fall under the weight of sanctions,” the agency cautioned. The agency held onto expectations that global oil demand will increase by 2 million barrels a day this year, thereby surpassing pre-pandemic levels.