Severe Chinese Restrictions Could Be a Direct Threat to Oil Demand
August 23, 2021
The Baker Hughes Rig Count had crude oil rigs up 8 to a total of 405 rigs. The last few weeks have brought the addition of several crude oil rigs and US production was up in last week’s inventory report so maybe the market does get a few extra barrels going forward. Last year at this time there were 183 crude oil rigs in operation.
Oil prices fell hard on Friday and it was another week of lower prices. Oil prices were off 2.2% on Friday mainly driven by the continued cases of COVID-19. After last week’s selloff prices are bouncing this morning higher in what is likely a near-term corrective rally. The US dollar has pulled back helping this current bounce in energy markets. Last week energy prices were down 8% to 9% in value and prices traded down to a nine-month low. The bulls have some work to do now to reestablish the uptrend. At a minimum, this market settles into a trading range.
The cost for shipping has been very strong and prices have gone up, but this stat caught my eye. The Global Freight Index is up 468% year or year.
China imposed new restrictions with its zero-tolerance policy on coronavirus policy. The most recent one is the disinfecting ships, which in turn is causing port congestion and shipping delays. John Kilduff of Again Capital said China is acting severely for minimal outbreaks, which is a direct threat to the oil demand.