By Nicholas Earl
Oil prices have tumbled in this week’s trading sessions, shedding last month’s gains, amid growing expectations of weaker demand from a global economic downturn.
Brent Crude has fallen 2.73 per cent to $79.86 per barrel in today’s trading, while WTI Crude slipped 2.63 per cent to $76.91 per barrel.
This follows both benchmarks plunging more than four per cent on Tuesday afternoon, after holding up firmly in the morning’s trading.
Brent Crude yesterday suffered its biggest one-day loss more than three months.
Oil has fallen sharply as concerns grow about weak demand due to the state of the global economy and China’s rising Covid-19 cases.
The Chinese government has also increased export quotas for refined oil products in the first batch for 2023, signalling its expectation of poor domestic demand.
Earlier this month, the head of the International Monetary Fund warned that much of the global economy would see a tough year in 2023, with US, Europe and China all experience weakening activity.
Commenting on the downfall in prices, Craig Erlam, senior market analyst at OANDA recognised there would be “significant disruption in the coming months” but expected prices to recover with increased demand.
“The medium-term prospects still appear quite bullish, especially if China can bounce back strongly later this year and fully transition to living with Covid, like much of the rest of the world. Of course, Russia remains the wildcard in all of this, both in terms of its output and influence within OPEC+,” Erlam said.
This outlook was shared by UBS, which still expects Brent prices to rise to $110 a barrel and WTI to rise to $107 in 2023.
However, such prices would be well below last year’s rally, when prices reached a 14-year high of $139 per barrel in March following Russia’s invasion of Ukraine, which sparked fears of supply shortages.
The American Petroleum Institute is set to release data on US Crude inventories tonight, while the Energy Information Administration will also release its own figures on Thursday, which could kickstart further movements across both benchmarks.
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