Oil declines as investors consider recession worries
On Thursday, oil prices fell further as investors reviewed the dangers of a recession and the impact of interest rate hikes in major economies on fuel demand.
By 0643 GMT, US West Texas Intermediate (WTI) crude futures had fallen $1.4, or 1.3 percent, to $104.78 per barrel. Brent crude futures decreased $1.3 (1.2%) to $110.40.
Both benchmarks fell by as much as $3 per barrel in early morning Asian trade after falling by around 3% the previous session. They have been at their lowest since mid-May.
Investors are debating how concerned they should be about central banks potentially driving the global economy into recession by raising interest rates to combat inflation. Hedge funds in the United States and Europe have started selling off positions ahead of the end of the second quarter, which is also dampening investor mood.
On Wednesday, US Federal Reserve Chairman Jerome Powell stated that the central bank was not attempting to orchestrate a recession to curb inflation but was committed to keeping prices under control, risking an economic slump.
China’s crude oil imports from Russia were up 55 percent in May, reaching a new high.
After Western certifiers withdrew their services due to global sanctions on Moscow, India is providing safety certification for dozens of ships managed by a subsidiary of prominent Russian maritime giant Sovcomflot, allowing oil deliveries to India and others.
Meanwhile, US Vice President Joe Biden has urged Congress to adopt a three-month suspension of the federal fuel tax to challenge record pump prices and bring temporary relief to American families this summer.
Rising oil prices have pushed Azerbaijan
Rising oil prices have compelled Azerbaijan to increase its national budget, with most of the increases earmarked for increased defense spending and reconstruction in Karabakh.
On June 20, Azerbaijan’s parliament’s Economic Policy and Labor and Social Policy Committees convened to consider a Ministry of Finance request to increase the 2022 budget by 8.1 percent, increasing spending to more than 32 billion manats [$19 million].
On June 22, the price of a barrel of Azerbaijani crude oil – known as Azeri Light – increased from $0.87 to $121.73. The budget for 2022 was planned with the assumption that oil would sell for $50 per barrel, but the average oil price in the first five months of 2022 has been $106.
Furthermore, the finance ministry revealed to the committees that taxes collected this year were nearly 2 billion manats [$1.2 billion] higher than expected.
Construction projects in Karabakh would benefit the most from the spending hike, receiving 2.7 billion manats [$1.6 billion], a 21% increase over the existing budget. Defense and national security spending increased by 13% to 5 billion manats.
Meanwhile, spending on social assistance for low-income Azerbaijanis expects to rise by 2.4 percent, while spending on education intends to increase by 0.06 percent. The amended budget would reduce spending on health care. According to critics, the favored industries are especially ideal for corruption, which is prevalent in Azerbaijani government spending.
Biden’s seven policies to lower oil
The price of gasoline in the United States has fallen marginally in recent days, but it is still high enough that the Biden administration is becoming desperate. The scenario might negatively affect congressional Democrats during the November midterm elections. Still, Biden’s efforts, such as the 260 million barrel SPR release, have not succeeded in lowering oil or gasoline prices. Seven CEOs from oil companies expect to attend a meeting at the White House on Thursday, June 23. CEOs from BP (NYSE: BP), Chevron (NYSE: CVX), and Phillips 66 are among those invited (NYSE: PSX).
The Biden administration has asked Congress to suspend the federal gasoline tax for three months while requesting that state governments suspend their state gasoline taxes simultaneously.
Although the federal gas tax is only 18 cents per gallon, the average state gas tax is 54 cents. These steps could result in a roughly $1 per gallon drop in gasoline prices for many households.
Although this would momentarily lower gas costs, it would not affect the price of oil. Indeed, there are some indications that this program may cause oil prices to rise. High gasoline prices have caused a reduction in gasoline use, alleviating the tight fuel market.
