(LONDON) Oil prices were down on Monday, weighed down by fears of a global recession impacting demand for black gold, offsetting supply concerns.
Posted at 7:03 a.m.
Around 5:40 a.m., a barrel of Brent from the North Sea, for delivery in September, lost 1.81% to 105.08 dollars.
A barrel of American West Texas Intermediate (WTI), for delivery in August, fell 2.28% to 102.40 dollars.
Recession fears and black gold supply shortages have been vying for the top spot in the oil market for weeks.
“As opposing forces clash, predicting future oil prices is a bold undertaking,” said Tamas Varga of PVM Energy.
According to the analyst, the fundamental question remains how long the invasion of Ukraine will last, with wars hampering economic growth due to inflation.
“The longer the crisis drags on, the more likely it is that demand-side considerations will override supply-side issues and become the dominant forces,” he says.
For Ipek Ozkardeskaya also, analyst at Swissquote, “fear of the recession and concerns about demand are taking over”.
Even if “the market remains vulnerable to news concerning supply”, the analyst estimates that in the absence of new “unexpected upheaval” in supply, the price of a barrel could fall to the threshold of 85 dollars.
In addition to lingering inflationary pressures, the rising dollar is also discouraging oil buyers, as a strong greenback reduces the purchasing power of investors using other currencies.
The US Federal Reserve (Fed) could once again increase its key rates at the next meeting at the end of July, after insisting on the need to curb inflation, even at the expense of economic growth.
But supply-side concerns remain to be monitored.
“First of all, there are about 5 million barrels per day of production stoppages due to sanctions or political tensions,” says Tamas Varga.
At the same time, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) appears to be close to the maximum of its production capacities, with many countries struggling to meet their quotas.