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Crude Oil Edges Lower; Demand Weakening Fears Continue to Mount

Commodities Aug 04, 2022 09:08AM ET
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By Peter Nurse 

Investing.com -- Oil prices edged lower Thursday, continuing to drop after falling to near six-month lows during the previous session on renewed demand fears, although global supplies remained tight.

By 9:10 AM ET (1310 GMT), U.S. crude futures traded 0.1% lower at $90.61 a barrel, while the Brent contract fell 0.5% to $96.33.

U.S. Gasoline RBOB Futures were down 1.8% at $2.8594 a gallon.

Both benchmarks fell by around 4% on Wednesday, to their weakest levels since February, after data from the Energy Information Administration showed a surprisingly large build in crude inventories of 4.5 million barrels last week.

The rise in stocks, particularly during the summer driving season, raised fears that the elevated oil prices are weighing on demand from the world’s largest consumer.

Adding to the concerns over global demand was the decision of the Bank of England to increase its benchmark interest rate by 50 basis points in an attempt to curb inflation that the central bank saw peaking at over 13% later this year.

The BOE also predicted the U.K. economy will enter recession in the fourth quarter of 2022, something that most economies in mainland Europe are likely to also suffer as the year progresses.

Countering this view was the news that Saudi Arabia, the world's top oil exporter, has raised its September crude oil prices for Asian buyers to record-high levels, suggesting continued demand from that part of the world.

Turning to the supply side of the equation, the Organization of Petroleum Exporting Countries and allies, a group known as OPEC+, agreed to a 100,000 barrel-a-day increase at its meeting on Wednesday.

“However, it is unlikely that the market will see this amount of oil, because many producers cannot increase production. This increase is so negligible when compared with the total global oil supply of around 100 million bpd, that it is essentially nothing,” said Ellen Wald, President at Transversal Consulting.

“OPEC+ is essentially treading water, waiting to see whether a global recession bites into demand and sends oil prices tumbling, or whether western nations will implement their own sanctions on Russian oil,” she added.

“It is unlikely that OPEC+ will try to put together a new longer-term production deal until they have a better idea of how these factors will impact the market.”

Reuters reported that Saudi Arabia and the United Arab Emirates, the de facto leaders of OPEC, stand ready to deliver a "significant increase" in oil output should the world face a severe supply crisis this winter, but there must be doubts about the extent of the spare capacity even these two major producers have.

Crude Oil Edges Lower; Demand Weakening Fears Continue to Mount
 

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Comments (6)
David Stocks
David Stocks Aug 07, 2022 11:00PM ET
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oil is doomed, abandon ship
First Last
First Last Aug 04, 2022 11:48AM ET
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To all those who's been blaming Biden for energy inflation (& everything else), why aren't you crediting Biden for today's price decline?
EL LA
EL LA Aug 04, 2022 11:48AM ET
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Who?
First Last
First Last Aug 04, 2022 11:48AM ET
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And if you wanna give Biden credit for something else, US gasoline prices have been falling for about 2 months.
Dave Stratos
Dave Stratos Aug 04, 2022 11:48AM ET
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I assume you are a stupid person. Gas prices are drastically up since he took office. He only gets credit when they are lower than when he took office.
First Last
First Last Aug 04, 2022 11:48AM ET
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Dave Stratos    Sure, let's have another pandemic w/ closed economies & no vaccines just to get gasoline prices back down.
hiiah Huuah
hiiah Huuah Aug 04, 2022 10:59AM ET
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The short together with medis trying to drive a bearmarked in the oil. Biden desperat to tame oil but we all know they are responsible for high prices. Oil will again get a run
Andrew Sim
Andrew Sim Aug 04, 2022 10:22AM ET
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fear mongering
Royce Murph
Royce Murph Aug 04, 2022 9:45AM ET
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So OPEC increases output. US SPR is at a 20 year low and we have "demand weaking".  LMAO, you Lib columnist..
First Last
First Last Aug 04, 2022 9:45AM ET
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It's "Demand Weakening Fears": fear that demand will weaken in the future.  Reread the 1st sentence:  "renewed demand fears, although global supplies remained tight."
Andrew Ulferts
Andrew Ulferts Aug 04, 2022 9:45AM ET
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First Last exactly. They are trying to manufacture the fear with these headlines and by shorting everything oil. We are not ALL stupid and gullible though. Like Royce said, if they have to beg for production and release our war time reserves, there is no problem with demand.
EL LA
EL LA Aug 04, 2022 9:45AM ET
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The Game of Chicken should be added to the World Olympics. There's so much of it happening everywhere today.
Amie Inconnue
Amie Inconnue Aug 04, 2022 9:45AM ET
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🤣🤣🤣 Would be a good chance for politicians to become Olympic champions!
 
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