The price of oil has tanked by nearly 5 percent since the OPEC meeting this week, with the benchmark US crude oil hitting $88 a barrel for the first time since Russia invaded Ukraine.
Additionally, fears of a looming economic recession globally are harming oil prices. We could well see Crude moving back into a new range of between $90.00 and $80.00.
The next big challenge for oil prices will be today’s Non-farm payrolls job report. Should we see a much-weaker number then the sell-off could easily accelerate.
Moreover, the tightness in physical crude markets seems to have eased in recent days, with spot deliveries being traded at smaller premiums.
A bearish signal for crude appeared to come from the Energy Information Administration’s data showing an unexpected and sizeable build in US commercial crude inventories.
The EIA or Energy Information Administration reported Crude oil inventories of 4.5 million barrels for the week to July 29. Additionally, last week a plunge in gasoline demand was also recorded.
Bank analysts note that “Oil prices are weak in the wake of the OPEC+ meeting, which may have less bearing on the price action than the outlook for the global economy as a possible coming recession impacts the demand outlook.”
The U.S. inventory ramp-up and the heightened concerns about oil demand are driving momentum. But in the more medium-term the decision of OPEC+ to raise the group’s targeted collective oil production is a concern.
The 100,000 barrels increase could become a trend. If this measure becomes a constant trend, we could well see OPEC going for another 100,000-barrel increase at the September meeting.
OPEC’s most prolific oil producer and exporter, Saudi Arabia, has raised the official selling price of its crude oil to new highs for September loadings.
Saudi Arabia also raised the price of crude oil heading to the United States, Northwest Europe, and the Mediterranean. Other OPEC producers often reset their prices too, following Saudi’s pricing action. It is also largely seen as a bellwether for how Saudi Arabia views future oil demand.