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Oil prices slid more than 2% on Thursday ahead of higher risk events that are expected to headline on Friday.
Brent had rallied above $75 earlier on Thursday in a confidence boost for OPEC+ that they had done the right thing by planning to boost production by another 400,000 bpd in January.
But by Thursday afternoon, both WTI and Brent had trailed off considerably.
At 3:05 p.m. EDT, WTI had slid $1.73 (-2.39%) to $70.63, while Brent had fallen $1.71 (-2.26%) to $74.11.
There is some fear lingering in the market with regards to additional Covid-19 measures that could dampen oil demand. But the appetite for crude oil on Thursday was also diminished by high-risk releases expected on Friday, with traders eyeing in particular, U.S. inflation figures.
Economists largely expect that U.S. inflation hit 6.8% last month.
The EIA on Wednesday adjusted its Brent spot price for this year and next, its December Short Term Energy Outlook showed. Its latest forecast for Brent crude is now $70.60 per barrel for 2021, and 70.05 per barrel in 2022.
This is down from its previous forecast made in November of $71.59 for 2021 and $71.91 for 2022. This is a far cry from November Brent prices, which the EIA says averaged $81 per barrel. For December, the EIA is banking on $71.
Another oil industry metric, Baker Hughes’ rig count, will also be released on Friday and will show the change in oil and gas drilling activity in the United States.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.
Rising inflation normally leads to rising value of the dollar as a result of the tightening measures that the US Federal Bank will take. This affects the demand for oil since other currencies become weaker against the dollar. On the other hand, the very same measures the Federal bank takes slows the growth of the US economy and reduces the value of the dollar. In a nutshell, one cancels the other leading to a very mild impact on oil prices and oil demand.
What might dampen oil prices slightly is lingering worries about the Omicron variant though recent reports from the WHO have confirmed that it is less dangerous than previous variants and that available vaccines are capable of dealing with it.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London