By Adedapo Adesanya
Brent crude fell by 3.5 per cent or $3.26 on Thursday as expectations of weaker demand and a strong US Dollar ahead of a potentially large interest rate increase outweighed supply concerns, closing at $90.84 per barrel.
Also, the United States West Texas Intermediate (WTI) crude depreciated by $3.38 or 3.8 per cent to settle at $85.10 a barrel as the International Energy Agency (IEA) said this week that oil demand growth would grind to a halt in the fourth quarter of the year.
It noted that growth in global oil demand has continued to decelerate, weighed down by renewed Chinese lockdowns and an ongoing slowdown in developing countries. This is partly offset by large-scale switching from gas to oil. World oil demand is forecast to rise by 2 million barrels per day in 2022 and 2.1 million barrels per day in 2023, marginally lower than in last month’s report.
World oil production rose 790,000 barrels per day in August to 101.3 million barrels per day with a strong recovery in Libya and smaller gains from Saudi Arabia and the UAE offset by losses in Nigeria, Kazakhstan, and Russia.
From August through December, growth is forecast to slow, edging up by just 280,000 barrels per day to 101.6 million barrels per day. In 2022, global production is forecast to rise by 4.8 million barrels per day, to 100.1 million barrels per day, and by 1.7 million barrels per day in 2023 to 101.8 million barrels per day.
Persistent demand weakness in China considerably slowed the pace of a summer ramp-up in refining activity. After reaching a post-Covid peak in August of 81.4 million barrels per day, refinery throughputs are expected to fall in September-October on seasonal maintenance.
Oil also came under pressure from a strong US Dollar, which makes dollar-denominated commodities more expensive for other currency holders, ahead of a Federal Reserve meeting next week that could hike interest rates by a jumbo 100 basis points.
Also, major railroad workers and unions in the US secured a tentative deal after 20 hours of intense talks brokered by President Joe Biden’s administration to avert a rail shutdown that could have hit food and fuel supplies across the country and beyond.
US crude inventories rose by a more than expected 2.4 million barrels, data showed on Wednesday – although again boosted by the ongoing releases from the Strategic Petroleum Reserve, part of a programme scheduled to end next month.
Modupe Gbadeyanka