WTI Crude oil futures concluded the previous week 2.34% down at $84.76 per barrel as demand concerns resurfaced. A strong dollar also pushed down energy prices by making commodities more expensive for buyers using foreign currencies. Better-than-expected US CPI statistics increased the Fed’s faith in big rate rises, triggering a demand-sapping recession.

Comments about replenishing the US Strategic Petroleum Reserves heightened market volatility. Also, last week was the biggest significant weekly SPR drawdown in US history. This brought emergency oil stockpiles to their lowest level since October 1984, after the administration announced in March a plan to release 1 million barrels per day over six months to fight high fuel prices.


Almost 8.4 million barrels of oil have been released from reserves, amounting to 1.2 million barrels per day. The momentum has returned, which is why we are witnessing an increase in commercial crude oil inventories. On the supply side, the potential for disrupted train shipments of petroleum and other products in the United States due to the possibility of a labor dispute curbed the downside.

Crude oil began the week on a high note, with news that the Chinese city of Chengdu had removed a two-week lockdown, encouraging hopes of a broader reopening across the country and bolstering demand in the world’s top crude oil importer. China’s recovery, which has been slowed by the zero-covid policy and lockdowns, is getting a boost from stimulus measures.

Meanwhile, Iraq has resumed crude oil exports from the Basrah oil terminal after an oil spill late on September 15th suspended loadings from the facility, limiting shipments from OPEC’s second-largest producer by 1 million barrels per day. A bleak economic picture is threatening global oil use. A hawkish US Federal Reserve, an impending Eurozone recession, and China’s zero COVID policy might all add to demand concerns.

This week, investors will be watching two important central bank meetings: the Fed and the Bank of England. The Fed is poised to give another jumbo-sized 75 basis point boost, while the BoE may opt for a 50 basis point hike, raising fears of a recession. Recession talk and aggressive rate hikes may weigh on oil consumption and prices. Sources advocate a sell-on-increase strategy and anticipate that prices will fall towards Rs. 6,500 per barrel this week. A rebound is possible if the Fed becomes less hawkish.

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