Brent Crude Oil Is Falling
Oil prices fell on Tuesday, reversing previous gains, as fears of a worldwide recession reducing fuel consumption outweighed supply disruption concerns, which were emphasized by an expected output decrease in Norway.
Brent crude dropped 38 cents, or 0.3%, to $113.12 a barrel.
West Texas Intermediate (WTI) crude in the United States fell 50 cents, or 0.46 per cent, to $107.93. Because of the US Independence Day public holiday, there was no WTI settlement on Monday.
Oil is still battling to break out of its current slump as the market shifts from inflation to economic gloom. Investors are becoming increasingly anxious about high inflation and a probable recession as oil costs rise. In South Korea, inflation touched a near 24-year high in June, fueling concerns about slowing economic growth and oil consumption.
However, supply issues remained. WTI gained more than $3 and Brent gained more than $1 earlier in the session on news of output disruption in Norway. According to the union organizing the walkout, Norwegian offshore workers have begun a strike. Because of this, oil and gas output will drop.
According to Norwegian producer Equinor, the strike is likely to lower oil and gas output by 89,000 barrels of oil equivalent per day, with gas output accounting for 27,500. Saudi Arabia, the world’s largest oil supplier, increased August crude oil prices for Asian clients to near-record levels due to constrained supply and strong demand.
The official selling price (OSP) for August-loading Arab Light to Asia received a boost of $2.80 per barrel from July to $9.30 per barrel over Oman/Dubai prices. It was close to the record high premium of $9.35 per barrel established in May.
Oil from U.S. Reserves Heads Overseas
According to data and sources, more than 5 million barrels of oil were sent to Europe and Asia last month as part of an unprecedented U.S. emergency oil reserves release aimed at lowering domestic fuel costs, even as U.S. gasoline and diesel prices reached record highs.
The export of crude and fuel is dampening the impact of US President Joe Biden’s measures to decrease record pump prices. Biden reiterated his request for gasoline suppliers to lower their costs on Saturday, garnering criticism from Amazon CEO Jeff Bezos. According to the data, Atlantic Trading & Marketing (ATMI), a subsidiary of TotalEnergies in France, exported two cargoes of 560,000 barrels each.
Phillips 66 declined to comment on the company’s trading behaviour. ATMI did not respond to a comment request. According to a shipping source, at least one cargo of oil from the West Hackberry SPR site in Louisiana should ship out in July.
Crude and fuel prices would almost certainly be higher if it hadn’t happened, but it isn’t having the expected effect.
The most recent deliveries follow three tankers that delivered SPR petroleum to Europe in April. They assist in the replacement of Russian crude supplies.
Crude inventories in the United States are at their lowest since 2004, as refineries operate at near capacity.
Global Oil and Gas Prices Have Been Highly Volatile
Over the last two and a half years, global oil and gas prices have been exposed to demand and supply shocks, often both at the same time. The resulting volatility in energy markets is both a mirror and a microcosm of the world’s deteriorating economy.
Brent crude oil prices fell from a “normal” $68 per barrel at the end of 2019 to $14 per barrel in April 2020 as the COVID-19 pandemic swept over the world. After Russia invaded Ukraine two years later, in March 2022, the price rose to $133 per barrel. It is now plunging again, as worries of a US recession mount. However, if the Chinese economy recovers from the coma caused by its zero-COVID policy, the price could skyrocket.
One reason for the volatility of oil and gas prices is that short-term demand for energy responds far faster to changes in growth than to price fluctuations. As a result, when there is an energy shock, it may require a significant price adjustment to clear the market. And the pandemic was the mother of all shocks, causing the most persistent shift in demand since World War II. Before COVID-19, worldwide oil demand was at 100 million barrels per day. Still, lockdowns reduced demand to 75 million barrels per day. Suppliers were unable to turn off the spigot quickly enough. The oil price momentarily plunged to a negative $37 per barrel on April 20, 2020. This was when storage facilities were overcrowded and suppliers scrambled to avoid dumping penalties.