By Adedapo Adesanya
Brent went down by 2.9 per cent or $3.06 on Thursday as it sold for $103.86 per barrel after a European Central Bank (ECB) rate hike stoked demand worries.
Also, the price of the United States West Texas Intermediate (WTI) crude depreciated by 3.5 per cent or $3.53 to settle at $96.35 per barrel.
The ECB on Thursday joined many other central banks in raising interest rates, focusing on fighting runaway inflation rather than the economic downturn, which can weigh on oil demand.
For the first time in 11 years, in an attempt to ease inflation in the euro zone, the central bank of the 19 nations that share the Euro currency surprised markets by pushing its benchmark rate up by 50 basis points and bringing its deposit rate to zero.
The move shocked the market that had been expecting a smaller hike of 25 basis points.
This added to the worry that the US Federal Reserve will continue to hike rates, triggering a recession that could further stymie demand.
In Japan, the Bank of Japan maintained ultra-low interest rates to stimulate stalling economic growth.
The rate hikes along with the return to the market of some Libyan oil production and an increase in COVID-19 cases out of China are pressuring the market.
On Wednesday, Libya’s National Oil Corp (NOC) said crude production had resumed at several oilfields after the lifting of force majeure on oil exports last week.
Meanwhile, the resumption of Russia’s gas flows to Europe eased supply concerns. Flows through Russia’s Nord Stream 1 natural gas pipeline, which runs under the Baltic Sea to Germany, partially resumed after being shut for maintenance on July 11.
The pipeline had already run on reduced volumes following a dispute sparked by Russia’s invasion of Ukraine.
Analysts that this may set the foundation for crude and its products to continue into Europe.
Amid the proposed cap on Russian oil, its Deputy Prime Minister Alexander Novak said the country would refuse to sell oil at all if the price cap was set below production costs, meaning that Russia would not be interested in pumping crude oil at a loss.
The US is holding out hope that there will be an agreement reached on capping Russian oil prices by this December.
Russian President Vladimir Putin also had a phone conversation with Saudi Arabia’s Crown Prince Mohammed bin Salman to discuss the oil market and the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) co-chaired by both countries.
The two parties also made a note of the importance of collaboration within OPEC+, adding that its members have consistently fulfilled their obligations to maintain market balance and stability in the energy markets.
OPEC+ has consistently failed to meet its production targets over the duration of the deal.
