Oil prices fell today, Tuesday, after rising for two days, with the return of concern about weak demand and the possibility of raising interest rates, for crude to abandon the support it obtained from the first cut in production targets announced by OPEC + since 2020.
New closures to curb the spread of COVID-19 in China have heightened fears that high inflation and higher interest rates will affect demand. The European Central Bank is widely expected to raise interest rates sharply when it meets on Thursday.
Brent crude fell $2.91, or 3%, to $92.83 a barrel upon settlement.
US West Texas Intermediate crude fell from trading on Monday to record 86.88 dollars a barrel when settling, and it increased by one dollar from Friday’s close. Markets were closed in the United States on Monday for the Labor Day holiday.
“The news about OPEC + is now in the market, and the focus has temporarily shifted to economic and inflationary concerns… including concerns about the extension of the Covid lockdown in China and the European Central Bank’s decision on the interest rate on Thursday,” said Tamas Varga, oil analyst at BVM Brokerage. “.
Bob Yauger, director of energy futures at Mizuho, said that with regard to supply, the indications are that reviving the Iranian nuclear deal with world powers is not imminent, which is putting pressure on crude prices by reducing the chances that OPEC + will go ahead with its plan to cut production.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, led by Russia, a group known as OPEC+, decided on Monday to cut the production target for October by 100,000 barrels per day. Prices rose on the Friday before the meeting and on Monday after the decision.
As a result of the US holiday, weekly US inventory data from the American Petroleum Institute and the Energy Information Administration will be released on Wednesday and Thursday, a day later than usual.
The European Central Bank meets on Thursday to discuss raising interest rates. This will be followed by the Federal Reserve meeting on September 21.