EconomyIt goes down: Oil price worldwide is back below...

It goes down: Oil price worldwide is back below 100 dollars

After the publication in the United States of the weekly energy report, where an increase in gasoline inventories was observed, and the scheduled reactivation of Russian gas supply to Europe, the price of oil lost 7.5% during the day of this Thursday.

In morning trading, the price of West Texas Intermediate (WTI) reached a low of 94.59 dollars per barrel with a drop of 7.5%, while Brent registered a level of 101.5 dollars per barrel, a decrease of 5%.

Later, the price of both references cut losses and for half a day the WTI traded with a drop of 5.3% to 96.88 dollars and the Brent of 2.3% to 104.48 dollars.

In the previous session, oil prices were caught in a tug-of-war between fears about lower supply caused by Western sanctions on Russia and expectations of economic weakness and the consequent reduction in demand.

However, an important factor in this Thursday’s fall was the report from the United States Energy Information Administration (EIA), since inventories of this fuel increased by 3.5 million barrels last week, far exceeding expectations for a 71,000-barrel increase.

In addition, data from the US government showed a drop in the demand for gasoline due to the record increase in its price reaching five dollars per gallon, affecting consumption during the high season of fuel consumption due to summer trips.

“It is important to mention that gas is usually very seasonal and when prices tend to rise it is due to greater demand for use in heaters in the US and Europe. So the fact that there is less supply undoubtedly brings a higher price in the commodities and in the end it will have an impact on the inflationary issue,” said Ana Sepúlveda, Client Portfolio Manager at Fintual.

Oil prices have remained mixed since their peak in March, which was $123.7 for WTI and $129.3 for Brent, due to the decline in consumption since June due to the growing risks of a global recession, which has rattled commodity markets and overshadowed the current supply shortage.

“WTI crude oil futures posted losses of more than 5%, trading below 95 dollars per barrel, affected by data pointing to weaker gasoline demand in the US, despite being in the peak driving season of summer”, indicated Monex analysts.

An important support for prices not to have significant losses during the session was the announcement that the Keystone pipeline, one of the main arteries of oil export from Canada, was operating with reduced rates for the third day.

Is there a chance of a supply cut from Russia to Europe?

Since the war in Ukraine began, there has been fear about the possible shutdown of supply in Europe, and after the Nord Stream 1 gas pipeline went into maintenance more than a week ago, there was strong speculation about its closure; however, the reactivation adhered to what was programmed by Russia. But what would a supply shutdown to Europe imply?

Gabriela Siller, director of economic analysis at Banco Base, believes that since the war began it is one of the most feared scenarios, since something like this would significantly disrupt the economy of the region and the world.

“In itself there was already a lot of fear with the war and the rise in the prices of raw materials and a price at levels of 170 dollars per barrel, obviously it would imply a pressure on inflation in the US that could reach 10% and in Mexico would be above 9%,” said the specialist.

For her part, Ana Sepúlveda, an analyst at Fintual, mentioned that it is difficult to imagine such a scenario, but it could work as a tool for Russia to reduce the economic restrictions imposed by Western countries. Sepúlveda added that this event could be an opportunity for companies and governments to work on innovation for renewable energy and thus get rid of dependence on these commodities.

“Since it has been a topic that has been discussed for several years and that is on the way. Then we could see it as something positive in that aspect”, added Sepúlveda.

With information from Reuters

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