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Oil is down strongly today with U.S. benchmark West Texas Intermediate lower by 5.13% to $102.61 a barrel.

You don’t need to look in obscure, dark corners of the financial market for the reason. The IMF sharply cut its forecast for global growth today and China announced that it would keep its Zero Cover lockdowns in effect. A slower global and Chinese economies will lower global demand for oil.


After pulling back to establish new positions, Russia has launched an intense bombardment all across Ukraine to soften up the country as Russia troops roll into Ukraine’s eastern region, the home of pro-Russian separatist governments. The new fighting promises to be even more vicious than the old fighting and already Ukraine’s Western supporters are looking for new sanctions to impose on Russia. A likely step by Europe’s NATO members will be a ban on Russian oil (and not I’d note Russian natural gas.) If these countries stop using Russian oil, they will have to seek alternative suppliers in an already tight global market.

Sanctions like this will only hurt Russia if the actual oil exported from the country falls. Until relatively recently Russia has been successful at finding alternative buyers to step up to make purchases for their home markets or to provide cover for exports actually headed to markets that have, in theory, banned Russian oil.

But that “success” has waned in the last week or so. In the seven days to April 15, volumes heading to Asia from ports on the Black Sea, Baltic and Arctic coasts plunged to the lowest in two months, according to Bloomberg. The average seaborne crude flows for that period have dropped to 3.12 million barrels a day, down by 25% against the week ended April 8. The dip is significant but it only takes exports from these ports back to the level seen in the week to April 1.

Meanwhile, pressure is mounting within the European Union for an embargo on Russian oil and the world’s biggest traders say they will stop handling oil exports from Russia. Russia’s production in the first week of April was down by about 500,000 barrels a day from March.

I’d guess that as fighting surges in Ukraine, Russian oil exports will drop and oil prices will rebound. I’m not looking to see a song string of days when lower oil prices (and the end of Federal gas mandates on airplanes) leads to big gain in airline stocks. Today, April 19, shares of American Airlines (AAL) were up 5.66% at the close. United Airlines (UAL) gained 4.50%. Delta Air Lines added 2.16%.