By Adedapo Adesanya
Oil prices dipped further on Thursday to their lowest levels before Russia’s February invasion of Ukraine over the possibility of an economic recession later this year that could hit energy demand.
Brent crude futures settled down by $2.66 or 2.75 per cent to $94.12 per barrel, and the United States West Texas Intermediate (WTI) crude futures settled downwards by $2.34 or 2.12 per cent to $88.54 a barrel.
Crude oil had surged to well over $120 a barrel earlier in the year following the COVID-19 pandemic which coincided with supply disruptions stemming from sanctions on major producer Russia over its invasion of Ukraine.
However, with recession fears gripping the market, those gains have been swiped off.
The Bank of England (BoE) raised interest rates on Thursday and warned about recession risks.
This is further affected after the Energy Information Administration (EIA) in one of the world’s largest consumers, the US, reported a large build in crude oil inventories of 4.5 million barrels for the week to July 29.
The main bearish signal for crude appeared to come from the data showing an unexpected and sizeable build in US commercial crude inventories and a plunge in fuel demand for the week ended July 29.
Analysts noted that the US inventory build and the growing concerns about oil demand in slowing economies were bigger drivers of oil prices than Wednesday’s decision of OPEC+ to raise the group’s targeted collective oil production by 100,000 barrels per day in September.
OPEC+ agreement on Wednesday to raise its output target equivalent to 0.1 per cent of global demand, was viewed by some analysts as bearish for the market.
The hike is one of the smallest since OPEC quotas were introduced in 1982, data from the cartel showed.
OPEC heavyweights Saudi Arabia and the UAE are also ready to deliver a “significant increase” in oil output should the world face a severe supply crisis this winter.
The demand outlook, however, remains clouded by increasing worries about an economic slump in the US and Europe, debt distress in emerging market economies, and a strict zero COVID-19 policy in China, the world’s largest oil importer.
