Oil Prices Recover as Supply Issues Resurface
Oil prices increased by as much as over 3% on Wednesday. Afterwards it reversed some of its gains as speculators flooded the market following a severe sell-off the previous day. Supply issues are once again at the forefront, despite persistent fears about a worldwide recession.
After falling 9.5 percent on Tuesday, the worst daily decline since March, Brent oil futures climbed as high as $3.08, or 2.9 percent, to $105.85 a barrel in early trade. At 0650 GMT, it was recently up $1.63, or 1.6 percent, at $104.40 per barrel. After dropping below $100 for the first time since late April, U.S. West Texas Intermediate (WTI) crude recovered to a session high of $102.14 a barrel, up $2.64 or 2.7 percent.
With the U.S. currency strengthening, it briefly dropped into the red. Afterward it recovered and closed up $1.20, or 1.2 percent, at $100.70 a barrel. The dollar reached multi-month highs versus other significant rivals and reached a 20-year high against the euro as investors fled to the safe-haven currency in response to increased recession worries stoked by rising gas costs and political unpredictability.
Should We Expect Lower Prices?
Dmitry Medvedev, a former president of Russia, issued a warning in the meantime. He claimed that a rumoured Japanese proposal to cap the price of Russian oil at roughly half its current level would result in significantly less oil being available on the market. Moreover, this will raise prices above $300-$400 per barrel. On the other hand, a union official and the labour ministry said that the Norwegian government intervened on Tuesday. It is trying to halt a walkout in the petroleum industry that had reduced oil and gas production, breaking a deadlock that may have made Europe’s energy crisis worse.
According to the NOG Employers’ Lobby, by Saturday the strike would have reduced daily gas exports by 1,117,000 barrels of oil equivalent (boe), or 56 percent, and lost 341,000 barrels of oil.
In June, more G10 central banks increased interest rates than in any month during the previous two decades combined, according to estimates by Reuters. The rate of policy tightening should not slow down in the second half of 2022 with inflation reaching multi-decade highs.