Ballasted by fears of recession in the midst of a global crisis in the cost of living, Brent, the benchmark for crude oil in Europe, fell below 90 dollars on Wednesday, a first since the beginning of February, before the Russian invasion of Ukraine.
Around 1:50 p.m. GMT (3:50 p.m. CET), a barrel of Brent from the North Sea for delivery in November lost 3.64% to 89.45 dollars.
A barrel of US West Texas Intermediate (WTI) for October delivery fell 3.98% to $83.42, slipping below $85 a barrel for the first time since January.
For Craig Erlam, analyst at Oanda, this new fall in prices will test the Organization of Petroleum Exporting Countries and their allies (OPEC+).
‘The question is, how long is OPEC+ going to wait and how much will prices drop before the alliance calls one of those emergency meetings that it’s been talking regarding?’, s’ he asks.
The alliance mentioned, during its last meeting, possible new discussions before the next meeting on October 5, ‘to respond if necessary to market developments’.
At the beginning of the week, crude prices had been supported by the announcement by OPEC+ of the reduction of 100,000 barrels per day of their production target for October.
“The logic behind the OPEC+ cut was to end the recent price decline and address price volatility,” says Stephen Brennock of PVM Energy.
For the moment, ‘it has failed on both counts’, with market participants seeing this reduction as ‘a clear sign of deteriorating demand prospects’.
‘The specter of a recession that would weigh on demand in the Western world is becoming a reality, as runaway inflation and rising interest rates dampen consumption,’ Mr Brennock said.
Closures in China
In China, both exports and imports slowed in August, “the new restrictions to fight once morest the Covid making their effects felt and the heat waves reducing the activity of the factories”, summarizes Susannah Streeter, analyst for Hargreaves Lansdown.
“Some 60 million people across the country are facing partial or full closures,” Brennock estimates. ‘It goes without saying that these restrictions will have a negative effect on fuel demand in the country.’
Earlier in the session, crude oil prices had briefly risen once more, Russian President Vladimir Putin having threatened on Wednesday to cease all deliveries of hydrocarbons in the event of a price cap, while denying himself to use energy as a ‘weapon’ once morest Europe which fears shortages.
Capping prices ‘would be an absolutely stupid decision’, Mr Putin said at an economic forum in Vladivostok (Russian Far East). ‘We will not deliver anything if it is once morest our interests, in this case economic. Neither gas, nor oil, nor coal (…). Nothing,” he added.
The President of the European Commission, Ursula von der Leyen, on Wednesday proposed to EU member states a cap on the price of Russian gas delivered to the Union, in order to “reduce Russia’s income”.
On the natural gas market, the Dutch TTF futures contract, the benchmark for the European market, was trading at 224.855 euros per megawatt hour (MWh), still falling despite the statements of the Russian president.
/ATS
