Oil prices fell further on Wednesday as investors worried about the global economy’s situation, OPEC+’s pessimistic oil demand signals, and tightened COVID-19 limitations in China.
Brent oil futures for October, which expire on Wednesday, were down $3.41 at $95.90 a barrel after losing $5.78 on Tuesday. At $94.87 a barrel, the more active November contract was down $2.97, or 3.04%.
By 1044 GMT, US West Texas Intermediate (WTI) oil futures were down $2.89, or 3.15%, at $88.75 per barrel, after falling $5.37 the previous session on recession fears.
‘The newest signals of stalling growth are falling Chinese manufacturing activity in August and the country’s service sector expanding at a slower-than-expected rate,’ Tamas Varga, analyst at PVM Oil Associates, said.
‘Furthermore, both the Fed and the ECB are expected to raise interest rates sharply next month, maybe by as much as 0.75% – all of which causes equity investors to flee. Oil follows suit, at least for the time being.’
China’s factory activity fell further in August as new COVID infections, the worst heatwaves in decades, and an ailing property sector impacted on output, indicating that the economy may struggle to maintain momentum.
Lockdowns and company closures are being implemented in some of China’s largest cities, from Shenzhen to Dalian, to combat COVID-19 breakouts at a time when the world’s second-largest economy is already experiencing slow growth.
A study by the Joint Technical Committee of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, added to the pessimistic indications. The JTC stated in it that its base case scenario was an oil surplus of 900,000 barrels per day (bpd) this year, up 100,000 bpd from its previous prediction.
Some members of OPEC+ have asked for cuts. The next OPEC+ meeting is scheduled for September 5.
Post Your Comments