This week saw oil prices plummeting over 10% to slip under the $100 mark. It comes at a time where there is real fear of recession hitting the US and other countries around the world. However, early Wednesday saw the price of oil rising 3% as concerns remained about supply.
It was on Tuesday that the price of Brent crude took a hit of nearly 9.5% to reach $102.8 per barrel, while the price of West Texas Intermediate crude fell over 10% to hit $97.43 per barrel. This marks the first time that West Texas Intermediate has traded under the $100 mark since the middle of May.
Analysts have suggested that there has been a reduction in the demand for diesel and gasoline across oil markets that is being linked to fear of an impending recession. While the price of oil has been rising for six months in a row, the fact that it has started to slip has meant that analysts on Wall Street are now expecting that the price of Brent crude could run as low as $65 by the end of 2022.
The US has been battling with rising unemployment levels against soaring costs for households and businesses, and the fears of recession are starting to look justified. All of which has made those recent predictions that oil could reach $140 per barrel look a little far-fetched.
Analysts are expecting the price of oil to stay relatively high despite the recent market fluctuation. Previous recessions have shown continued demand for commodities like oil and Wednesday saw the price of oil rebound 3%. This comes at a time when the dollar soared to a 20-year high against the euro and a stronger dollar tends to make oil more expensive, therefore limiting demand.
All of this is set against a confusing picture such as recent threats by Russia to limit the quantity of oil on the market that is contrasted against Norway recently ending a strike in the petroleum sector that could increase supply.
The soaring price of oil has been one of the defining features of 2022 so far, and it has reached its highest levels since 2008. The rise in oil prices came at a time when there was a newfound demand for oil as economies recovered from the effects of the pandemic, and ongoing supply chain problems pushed up the prices even further. Plus, with the ongoing Russian invasion of Ukraine, there have been real concerns about shortages, given the EU’s dependence on Russian oil.
This caused the price of West Texas Intermediate crude to peak at a staggering $130.50 per barrel this March. The price of Brent crude was even higher and it nearly broke through the $140 mark. Plus with high commodity prices pushing inflation to its highest rates in 40 years, it’s left the economy in a grim state.
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