Futures fall to pre-Ukraine War level due to demand fears

• Oil futures fell Tuesday to levels never seen since Russia invaded Ukraine.
• In the face of economic uncertainty, traders are concerned about oil demand.
• They have reduced their net Brent oil long positions by around one-third over the week to Tuesday.

Only days after the announcement EU price cap of $60 a barrel price cap for Russian crude kicked in, oil futures slumped to levels not seen before the Ukraine invasion, as jittery traders exit the market aheadOf the holiday season.

Tuesday US West Texas IntermediateOil futures fell 3.5% to $74.25 per barrel, their lowest settlement price for the year. International Brent crude futures settled at $79.35 per barrel, 4% less than this year. On Wednesday morning, early Asian trade was open. US WTIOil futures were 0.3% lower at $74.05/barrel, while international Brent crude oil futuresAt $79.29 a barrel, the price was 0.1% lower 

Data from Intercontinental Exchange shows traders reducing net long positions Brent futures in Brent futures by approximately one-third over the week to Tuesday, wrote ING commodity strategyrs Warren Patterson and Ewa Mannthey. Monday note.

“This is a net long speculator’s holding since November 2020, and reflects growing demand worries,” the ING strategists stated. 

The oil market sentiment has been on an up-and-down ride recently. Tuesday’s bearish sentiment was in contrast to Tuesday’s bullish sentiment. optimism earlier in the week — oil prices had risen on indications that major oil consumer China is easing its strict COVID-19 restrictions and OPEC stuck to its production cut target.

However, the price cap for Russian crude oil remains in effect. spark uncertaintyOil markets. Tensions could continue to escalate. send prices soaring if Russia can’t find enough “dark ships” — vessels that turn off tracking devices — to export crude covertly.

The US economy’s resilience is another key factor in dampening market sentiment. This raises questions about whether the FedIt would actually reduce its aggressive interest rate increases to curb inflation. 

Market concerns about economic growth and demand for crude could spur OPEC to follow through with oil production cuts in the future, Yeap Jun Rong, a market strategist at online trading platform IG, wrote on Wednesday. Yeap also said that oil prices could fall further ahead the OPEC’s next meeting, February 2023, due to a lack of clarity on the group’s strategy.