On Thursday, crude oil prices increased as Russia threatened to stop selling crude oil and gas to select customers. However, the market was also affected by worries that China’s extension of COVID-19 lockdown measures would stifle global economic growth and reduce fuel demand.
After dipping to $87.24 earlier in the day, their lowest level since January 25, Brent crude futures were up 94 cents, or 1.1%, to $89.94 a barrel at 14:10 GMT. After dropping to $81.20, their lowest level since January 12, U.S. crude oil futures were up $1.36, or 1.7%, at $83.3 a barrel.
Prices received some support on Wednesday from Russian President Vladimir Putin’s warning to freeze crude oil and gas exports if European purchasers impose price limitations. The European Union recommended restricting Russian gas prices on Wednesday, increasing the possibility of rationing in some of the richest nations this winter if Moscow follows through on its threat.
A significant portion of the gas supply to Europe has already been shut off by Russia’s Gazprom (GAZP.MM), which has already suspended flows from the Nord Stream 1 pipeline.
Sharp drops in crude oil prices were seen in the previous session, and they persisted into early Thursday trading, as worries about the state of the global economy and forecasts of declining fuel demand caused concern. The fall, according to Saxo Bank analyst Ole Hansen, was “motivated by persistent demand uncertainties relating to the possibility of growth-killing rate hikes from central banks combating runaway inflation and China’s continued economic difficulties caused by its COVID-zero policy,”
Banks Stance on Inflation
In the meantime, a number of central banks worldwide are anticipated to start a fresh wave of interest rate increases to combat inflation. The European Central Bank prioritized the fight against inflation even as the euro zone economy is expected to enter a winter recession on Thursday by increasing its benchmark interest rates by an unprecedented 75 basis points and signaling additional increases.
In an effort to address the country’s energy crisis, Britain’s new leader Liz Truss announced on Thursday that it would freeze consumer energy prices for two years and allocate billions to support power companies. JP Morgan stated that in order to “stop the downward momentum in prices and realign physical and paper markets, which appear separated,” OPEC+ may need to reduce output of crude oil by 1 million barrels per day (BPD).
On Monday, the Organization of the Petroleum Exporting Countries and its allies, including Russia, came to an agreement to reduce their output by 100,000 BPD in October. In the most recent week, gasoline inventories decreased while U.S. crude and distillate stocks increased, according to market sources quoting American Petroleum Institute data on Wednesday.
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