Sonali Paul

MELBOURNE (Reuters – Monday’s oil prices plunged due to concerns that China is slowing its economic growth, which outweighs fears about possible disruptions in supply from a European Union ban on Russian crude.

Futures dropped $1.21 or 1.1% to $105.93 per barrel at 0205 GMT. U.S. West Texas Intermediate crude futures declined 99cs or 1% to $103.70 per barrel. On Monday, markets in Japan and India closed.

After China’s Saturday release of data, prices fell. It showed that China’s second largest economy saw its factory activity contract for the second month. This was due to COVID lockdowns.

Tobin Gorey, a Commonwealth Bank commodity analyst wrote in a note, “A slowing that magnitude, when China already suffers from a real estate bust and worries over its (until lately) increased regulation is potentially major problem for commodity markets, the world economy”

Libya’s National Oil Corp, (NOC), stated that on Sunday the Zueitina terminal would be reopened temporarily to help reduce storage tank stockpiles and prevent an “imminent environment disaster” at this port.

Late April, the NOC declared force majeure for some Zueitina shipments as a result of political protests that forced many oil facilities to cease operations.

Two EU diplomats spoke out after discussions between EU member countries and the European Commission on Saturday to say that limiting the downside of oil prices will be a significant dent in the supply. They also suggested that the European Union may consider banning Russian oil imports by the end the year.

About half the 4.7 million Russian barrels per daily (bpd), crude oil exports are sent to Europe. This means that Russia supplied about one-fourth the EU’s 2020 oil imports.

Although Western nations have restricted their purchases of Russian oil due to sanctions that have affected shipping and insurance, global supply is still being supported by India’s purchase of lower-priced Russian goods.

Analysts at Royal Bank of Canada estimated that India’s crude oil imports from Russia rose from below 100,000 bpd by 2021 to over 800,000. bpd as of April. They expect India will continue to increase imports so long as Washington doesn’t impose any secondary sanctions.

Reuters reports that Indian oil refiners have reached a 6-month-old deal with Russia in order to import millions more barrels each month.