Oil back to around $100 per barrel

19 Jul 2022 , 08:03 AM

Oil prices continued to rise on Monday, supported by growing worries about Russian gas supplies and a weaker currency, which outweighed demand worries brought on by a potential recession and Chinese lockdowns.

After rising 2.1% on Friday, Brent crude futures for September settlement increased by $4.44, or 4.4%, to $105.60 a barrel by 1427 GMT.

After increasing by 1.9% the previous session, U.S. West Texas Intermediate (WTI) crude futures for August delivery were up $4.10, or 4.2%, at $101.69.

According to a letter seen by Reuters, the Russian gas export monopoly Gazprom imposed force majeure on gas deliveries to at least one significant customer in Europe, potentially escalating the continent’s supply shortage. The chance that the Russian government will announce the next stage in severely restricting gas exports to Europe as a countermeasure has increased as European leaders have vowed to tighten sanctions against the Kremlin.

On Monday, the U.S. dollar declined from multi-year highs, helping to maintain the prices of commodities like gold and oil. Dollar-denominated goods are more affordable for owners of other currencies when the dollar is lower. Fears of a recession that would affect oil demand led to the largest weekly drops in both Brent and WTI last week.

The world’s second-largest oil user, China, is concerned about the demand for oil as large-scale COVID-19 testing operations resume in some areas of the country this week. But supplies are still scarce. As was to be expected, US President Joe Biden’s visit to Saudi Arabia produced no commitment to increase oil production from the top OPEC producer.

In order to cut oil costs and combat inflation, Biden wants Gulf oil producers to increase production.