Oil Continues To Decline, But Will It Get To The Old Price?
On Monday, oil prices fell, continuing a recent losing streak due to worries that a predicted increase in U.S. interest rates will reduce fuel consumption.
By 0645 GMT, Brent oil futures for September settlement were down $1.19, or 1.2 percent, at $102.01 per barrel. The price of U.S. West Texas Intermediate (WTI) oil for September delivery dropped $1.33, or 1.4 percent, to $93.37 a barrel, falling for a fourth straight day. Both lost their initial gains.
According to Tetsu Emori, CEO of Emori Fund Management Inc. the oil prices have been under pressure due to rising concerns that aggressive rate hikes by the U.S. Federal Reserve may slow the global economy and diminish gasoline consumption. According to him, the Chinese economy’s slow recovery is also having an impact on market mood.
What to Expect from Oil Markets in Upcoming Weeks?
As traders attempted to balance the likelihood of further interest rate increases, oil futures remain volatile. This likelihood could restrict economic activity and thereby slow the growth in fuel demand. Moreover, with the tight supply resulting from disruptions in the trading of Russian barrels due to Western sanctions during the Ukraine conflict, the oil prices remain uncertain.
At its meeting on July 26–27, the Federal Reserve is expected to likely increase interest rates by 75 basis points. Due to COVID-19 lockdowns, a sluggish real estate market, and a cautious consumer attitude, China, the second-largest economy in the world, just avoided experiencing a decline in the second quarter, expanding just 0.4 percent year over year.
On the supply side, Libya’s National Oil Corporation (NOC) stated in a statement early on Saturday that it hopes to resume production at 1.2 million barrels per day (BPD) in two weeks. By a modification of sanctions adopted by member states last week to reduce the threats to global energy security, the European Union said last week that it would permit Russian state-owned firms to export oil to other nations.
Elvira Nabiullina, the governor of the Russian Central Bank, stated on Friday that Russia would not provide oil to nations that choose to set a price restriction on its oil.
