International oil prices recorded significant falls this Wednesday, due to the uncertainty surrounding the economic performance of the United States, China and Europe, which could impact demand in the strong summer vacation season. Also added was an increase in weekly oil inventories from the Energy Information Administration.
At the close, the West Texas Intermediate (WTI) decreased 2.78% to have a price of 88.14 dollars per barrel, while the Brent fell 3.18% to settle at a price of 93.7 dollars per barrel.
Downward pressures continue to be related to concerns about possible recessions in the United States and Europe, coupled with further economic weakness in China. Concerns increased after the Energy Information Administration (IEA) published on Wednesday a rise in US oil inventories of 4.5 million barrels over the past week.
“In the midst of the ‘practices’ with live ammunition that China is carrying out in front of Taiwan, the news is the drop in oil prices that occurred on Wednesday afternoon, when an unexpected increase in crude oil inventories in the US and a very modest increase in production (100,000 barrels per day) by OPEC,” said Ben Laidler, Global Strategist at eToro.
Given the prospect of a fall in demand, specialists recommend closely watching the resumption of talks on the nuclear agreement with Iran to see if the negotiators can break the impasse, since these developments are not unrelated to energy traders, so they said no one will start pricing the additional barrels of Iranian crude to hit the market before the end of the year.
“If energy markets remain in bearish demand mode, oil could drop another $5, but that shouldn’t be the base case. The oil market is mixed, as demand destruction is met by limited spare capacity. Ongoing weakness should be unlikely as the oil market remains tight,” said Edward Moya, an analyst at Oanda.
How did other commodities fare?
Gold ended the session with gains, trading at $1,793.27 per ounce, rising 1.59%, making it its best price in a month. On the other hand, silver closed at a price of 20,135 dollars per ounce, which meant an increase of 1.21%.
These gains were mainly due to an increase in the demand for the precious metal as a refuge asset, because, although Nancy Pelosi’s trip to Taiwan has already ended, the consequences of the visit will last, since China has already begun military exercises in the areas that surround the island, so geopolitical tensions may increase.
Gabriela Siller, director of economic analysis at Banco Base, pointed out that there are concerns about global economic activity, given the possibility of a recession in the United States and Europe, which is why gold becomes a refuge for investors.
Agricultural commodities closed the session with gains due to the weakening of the US dollar and the expectation of higher demand. Therefore, wheat and soybeans increased by 2.36 and 3.60%, respectively, and closed the session trading at 7.81 and 14.19 dollars per bushel.
For its part, corn gained 1.64% and closed the day trading at 6.06 dollars per bushel, after losing 5.15% the previous two days.
