FILE PHOTO – A PetroChina worker inspects a pump jack at an oil field in Tacheng, Xinjiang Uygur Autonomous Region, China, June 27, 2018. REUTERS/Stringer AT
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- BoE raises rates, warns of recession risks
- Saudi Arabia and the UAE are conserving oil firepower in case of a winter supply crunch
- OPEC+ agrees to raise oil production target by 100,000 bpd
- Shrinking global supply offers price support – analysts
LONDON/NEW YORK, Aug 4 (Reuters) – Global oil prices fell on Thursday to their lowest levels since before Russia’s February invasion of Ukraine, as traders worried about the possibility of an economic recession later this year that can torpedo energy demand.
Benchmark Brent crude futures settled down $2.66, or 2.75%, at $94.12, the lowest close since Feb. 18. West Texas Intermediate (WTI) futures settled down $2.34, or 2.12%, at $88.54, the lowest close since Feb. 2.
The fall in oil prices may come as a relief to major consumer nations, including the United States and countries in Europe, which have urged producers to increase production to offset tight supplies and fight raging inflation.
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Earlier in the year, oil jumped to well over $120 a barrel. A sudden recovery in demand since the darkest days of the COVID-19 pandemic has coincided with supply disruptions stemming from sanctions against major producer Russia over its invasion of Ukraine.
Thursday’s selloff followed an unexpected jump in U.S. crude inventories last week. Gasoline inventories, a substitute for demand, also showed a surprise increase as demand slowed under the weight of gasoline prices near $5 a gallon, the Energy Information Administration said. Read more
“Wednesday’s weakness after weaker-than-expected hinted US gasoline demand, along with a break in technical support levels on Thursday, appears to have sent oil lower,” said UBS analyst Giovanni Staunovo.
The demand outlook remains clouded by growing worries about an economic downturn in the United States and Europe, debt woes in emerging market economies and a strict zero-covid-19 policy in China, the world’s biggest oil importer.
“A break below $90 is now a very real possibility, which is quite remarkable given how tight the market remains and how little opportunity there is for this to ease,” said Craig Erlam, senior market analyst at Oanda in London.
“But the talk of a recession is getting louder, and if it becomes a reality, it’s likely to address some of the imbalance.”
The Bank of England (BoE) raised interest rates on Thursday and warned of recession risks.
OPEC+’s agreement on Wednesday to raise its production target by 100,000 barrels per day (bpd) in September, equivalent to 0.1 percent of global demand, was seen by some analysts as bearish for the market. Read more
OPEC heavyweights Saudi Arabia and the UAE are also poised to provide a “significant increase” in oil output if the world faces a severe supply crunch this winter, sources familiar with the thinking of the biggest Gulf exporters said. Read more
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Additional reporting by Laura Sanicola, Richard Valdmanis and Emily Chow; Editing by Bernadette Baum and Kirsten Donovan
Our standards: The Thomson Reuters Trust Principles.
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