Pressure on Oil Prices Due to Three Factors| Influencer‘s Insight •Jasper Lo

With regard to oil prices, it is necessary to pay attention to three crucial political and economic factors this week that seem to be unfavourable for the trend of oil prices coincidentally. It is adverse impacts triggered by them that must be focused on if you are keen on oil prices.

COVID-19-related factor comes first. Pandemic situation worsening further in Asia, the number of new confirmed cases in India and Japan has surged again, which has also haunted Pakistan and the Philippines. Even Hong Kong and Macao announced the circuit-breaker mechanism on civil aircrafts from India, Pakistan and the Philippines, issuing a ban on the landing of flights from these regions in Hong Kong. As for Japan, comments on the suspension of the Tokyo Olympics have been risen because of its domestic worsening situation. As a result, the prices of NYMEX WTI (CL) witnessed a resistance level and fell back.

Speaking of the climate, Biden is about to invite heads of 40 countries on April 22nd to the climate forum convened by him, hoping to further reach a climate plan relating carbon emission cuts. A joint statement issued by Kerry, U.S. Special Presidential Envoy for Climate, and Xie Zhenhua, Chinese Special Envoy, after their meeting noted that two nations will discuss the room for cooperation against global climate crisis and the commitment to this aspect, which is believed to further promote the environmental protection and the renewable energy resources, thereby having an influence on reducing the use of traditional energy resources. This trend is predicted to impact oil prices negatively.

As for geopolitics, following the US large-scale sanction against Russia, Poland and Czech Republic took the same action because of the severer crisis between Russia and Ukraine. The UK even sent two warships to the Black Sea in a demonstration of its military support for Ukraine. It is predicted that EU, NATO and the other European countries will join in the related action to support Ukraine. As one of the oil-rich nations, Russia saw a different situation from the Middle East when it came to the geopolitical tension. Generally speaking, oil prices bear witness to a rapid growth during the outbreak of such tension in the Middle East whereas they plummeted totally amid the Russo-Ukrainian War in 2014, including the prices of CL plunging from USD 107 to USD 26. As a result, a conspiracy emerged that the US was behind this sharp decline that aimed to set off the crisis in Russias energy profits. During the previous war, Russia declared the slump in oil prices (the situation repeats this time), conducting retreat when its economy was impaired by severe recession.

Consequently, the CL prices, reaching USD 64 and falling back, is possible to drop to the recent strong support level at USD 57. If maintaining this figure is made impossible by the worsening situation, prices are expected to have a chance to hit USD 54 even USD 51.5 before their cessation.