Oil Prices Drop
Amid worries about demand growth ahead of important inflation data and a Federal Reserve meeting in the US later this week, oil prices declined on Monday.
The US West Texas Intermediate (WTI) crude futures slid $3.05 or 4.4% to trade at $67.12 a barrel, while Brent crude futures declined $2.95 or 3.9% to end at $71.84 a barrel.
The price gain from Saudi Arabia’s commitment to reduce output in July was wiped by dismal Chinese economic statistics last week, causing both Brent and WTI to report a second consecutive weekly fall.
The US Federal Reserve, which will meet on Wednesday and is anticipated to leave interest rates unchanged this month, is now the center of attention.
Investors are worried because it looks like rate increases will resume next month.
The US Federal Reserve has consistently raised interest rates, which has strengthened the US dollar and driven up the cost of commodities for holders of other currencies.
The fact that China, the leading importer of crude oil and processed goods, has seen little improvement in its oil consumption is another concern for investors.
Analysts highlighted that although Chinese demand may be as high as 2 million barrels per day, it hasn’t shown any indications of materializing.
There are concerns that the International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC) would lower their demand projections. On Tuesday, both will present their respective monthly market updates.
Early on Sunday, Goldman Sachs lowered its predictions for oil prices, citing higher-than-anticipated supplies for the remainder of this year and until 2024.
The bank’s projection for the price of crude in December is currently $86 per barrel for Brent, down from $95, and $81 per barrel for WTI, down from $89 per barrel.
The price of US sour crude has also increased, reaching its highest level in a year as the government gave the impression that it would now be prepared to start replenishing the SPR.
In addition to plans to buy a further 3 million barrels later in the year, the government this week announced the acquisition of 3 million barrels of crude.
