Crude oil prices appear to be set for another losing week pressured by central bank monetary policies and continued demand concern.
Brent crude was trading at above $89 per barrel and West Texas Intermediate was at over $84 per barrel at the time of writing, both modestly up on morning trade in Europe, largely thanks to renewed supply fears after Russia’s warning it would stop selling oil to countries that enforce a price cap.
"Will there be any political decisions that contradict the contracts? Yes, we just won't fulfill them. We will not supply anything at all if it contradicts our interests," President Vladimir Putin said this week following news of a gas price cap being considered by the EU.
"We will not supply gas, oil, coal, heating oil - we will not supply anything," he added.
Meanwhile, the latest weekly EIA report on oil inventories added to downward pressure on prices as it estimated a sizeable inventory build of 8.8 million barrels for the week to September 2.
Yesterday, U.S. Energy Secretary Jennifer Granholm told Reuters the administration was considering an additional release of crude oil from the strategic petroleum reserve if it was necessary after October, when the current release plan ends.
The Biden administration had earlier this year said it would begin to replenish the SPR once the release program ends. It envisaged a total of 180 million barrels to be released into the market as a way of bringing retail fuel prices down.
"Fundamentally, a sharp decline in the US SPR suggests that undersupply is still a predominant issue in the physical oil markets, though recession fears may continue to weigh," CMC Markets analyst Tina Teng told Reuters today.
Recession fears also remain an important issue for prices, which earlier this week caused Brent to slide below $90 per barrel for the first time since February.
“The spectre of a demand-sapping recession across the western world is closer to becoming reality as soaring inflation and rising interest rates dents consumption,” PVM analyst Stephen Brennock told the FT.
By Irina Slav for Oilprice.com
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