(London) Oil prices fell nearly 5% on Wednesday, swept away by fears of recession combined with President Biden’s desire to intervene to stem the escalation in fuel costs triggered by inflation.
Posted at 7:21 a.m.
Around 5:45 a.m., a barrel of Brent from the North Sea for August delivery fell 4.23% to 109.80 dollars.
A barrel of US West Texas Intermediate (WTI) for delivery the same month, which is the first day of use as a benchmark contract, lost 4.71% to 104.36 dollars.
The two benchmarks were both trading at their lowest in a month, below the $110 per barrel mark.
“Fears of a recession and the (Thursday) meeting between representatives of the American oil industry and US President Biden are cited as the reasons for this new fall in prices”, commented Carsten Fritsch, analyst for Commerzbank.
Before this meeting, President Joe Biden will ask the US Congress on Wednesday to suspend a federal tax on gasoline prices for three months.
The White House wants to remove a federal tax until September and calls on states, which also tax gasoline at the pump, to do the same, in order “to directly relieve American consumers who are suffering from Putin’s price hike said senior administration officials.
“This is an example of the markets reacting negatively to the uncertainty generated by political intervention,” said Ricardo Evangelista, analyst for ActivTrades.
“Despite the underlying conditions, with demand outstripping supply, prices still fell as investors reacted to the Biden administration’s drive to cut fuel costs,” he continued.
In addition to this proposal to abolish the tax, which is the responsibility of Congress, there are other measures, in particular asking refiners to increase their crude processing capacities.
Joe Biden had already attacked the American oil industry on several occasions, which, according to him, does not develop the projects already approved to increase the production of black gold.
“Refinery profit margins — well above normal — that are passed directly on to American families are not acceptable,” Biden wrote in a letter sent last week to seven major oil companies.
“Exxon has made more money than God this quarter,” the American president recently quipped.
“A number of market participants clearly believe that the oil industry will comply with Mr. Biden’s wish and significantly increase the supply of gasoline,” Carsten Fritsch said.