(London) Oil prices fell on Thursday, weighed down by the prospect of a recession fueled by recent data and forecasts for inflation rates in Western countries, still at historic levels.
Posted at 6:47 a.m.
Around 5:20 a.m., a barrel of Brent from the North Sea, for delivery in September, lost 2.21% to 97.37 dollars.
A barrel of American West Texas Intermediate (WTI), for delivery in August, slid 2.76% to 93.64 dollars.
“Fears of a slowdown in demand due to a possible recession have almost erased the gains made after the invasion of Russia”, underlines Stephen Innes of SPI, when crude prices had been propelled to levels not seen since the financial crisis of 2008.
The European Commission on Thursday lowered its growth forecasts for the euro zone for 2022 and 2023, to 2.6% and 1.4% respectively, against 2.7% and 2.3% expected so far, due to the growing impact of the war in Ukraine.
Inflation has meanwhile been propelled to historic highs, with consumer price inflation estimated at 7.6% in 2022 and 4% in 2023, from 6.1% and 2.7% previously, according to forecasts from Brussels.
On Wednesday, the publication of the consumer price index (CPI) in the United States in June “reinforced the prospect of an aggressive hike by the Fed to slow the American economy,” said the analyst.
Prices soared again in June in the country, with inflation reaching 9.1% and climbing to the highest since November 1981. A sharp rise that threatens growth, consumption being the main driver of the US economy .
Jerome Powell, Chairman of the US Federal Reserve (Fed) has already indicated that the institution intends to raise its rates further by the end of the year, and recalled that the urgency was first to curb the inflation admitting that in return, a recession was possible.
For Tamas Varga, analyst at PVM Energy, with a new rise in key rates, “the economy should contract” and growth will gradually slow down, “which will have an inevitable impact on the demand for oil”.
According to the analyst, signs of a slowdown in demand are already visible.
The US Energy Information Agency’s (EIA) weekly report on US oil inventories, released on Wednesday, showed a surprise rise of 3.3 million barrels, as analysts expected a contraction of 1.5 million.
The EIA also reported a 5.8 million barrel increase in gasoline inventories.
“It would be premature and even foolish to draw a quick conclusion based on a single set of data”, warns Tamas Varga, but “although current stocks still show considerable deficits compared to long-term standards, further increases will be a clear sign of weak demand.”