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  HOME PAGE 09/08/2022 08:33 
06.07.2022 11:42 News >> Oil Pares Earlier Losses Over Rising Supply Fears

Oil Pares Earlier Losses Over Rising Supply Fears

Both benchmarks posted 10% losses on Tuesday as US dollar index climbed to highest level in almost 20 years.

Oil prices rebounded on Wednesday over investor fears of supply tightness after declining almost 10% on Tuesday due to inflationary and recession fears.
International benchmark Brent crude was trading at $105.14 per barrel at 10.05 a.m. local time (0705 GMT) for a 2.30% increase after the previous session closed at $102.77 a barrel.
American benchmark West Texas Intermediate (WTI) was at $101.27 per barrel at the same time for a 1.77% gain after the previous session closed at $99.50 a barrel.
With the US dollar index climbing to its highest level in almost 20 years on Tuesday, fueling global economic recession fears, both benchmarks recorded the steepest declines since March.
"With oil prices falling by 10%, we could expect some relief at the pump," Randall Mohammed, the former vice president of energy for Ahart Solutions International and energy market commentator, told Anadolu Agency.
Mohammed explained that the US federal bank, led by Fed Chairman Jerome Powell, has raised interest rates three times this year. He is also poised to implement another rate hike in the coming month to combat spiralling inflation which could lead to a recession if not addressed.
He said the Fed has taken a more hawkish approach by raising the fed fund rate by 75 basis points to combat rising prices, which he said was expected "as an attempt to squeeze the money supply and cool the economy."
"We've seen an inversion of the yield curve, which puts short term rates higher than long term. Historically an inverted yield curve is followed by recession which curtails aggregate demand, slowing economic growth," he said.
Prices poised to fall against rising inflation
Prices, however, pared some losses as tight supply outweighed economic concerns.
In an e-mailed note, Rystad Energy's Senior Oil Market Analyst, Louise Dickson, said the Russia-Ukraine war still impacts oil markets and is a crucial factor supporting high prices.
"If the war continues, it will only exacerbate the energy crisis and price inflation in Europe, which could slash oil demand in the year's second half by 800,000 barrels per day," she said.
Dickson said the supply-side pressure, in particular from outages in Libya, Ecuador, and Nigeria, is not balancing out an ever-resilient Russia, "which has shaken off the taboo in selling oil, with heavy discounts opening up new markets and bringing crude oil production closer and closer to pre-invasion volumes of 10 million barrels per day."
"If a recession materializes and inflation continues to push prices for almost everything higher," Dickson said oil demand is almost certain to fall, bringing prices with it. -



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