(Daniel Kostecki – Conotoxia)
Oil prices fell to $90 per barrel on Wednesday morning. That came after yesterday’s OPEC+ decision, which probably contributed to a 4% reduction in a single session. In addition, the oil price could be affected by the EIA data on oil inventories and fuel demand.
OPEC+ countries decided to increase the oil supply by 100,000 barrels per day in September. At the same time, they made it clear this was probably the end of production increasing.
Americans are driving less than they did during the lockdown
OPEC+ has signalled that capacity is already limited, and the group of the world’s major oil producers, even if it wanted to, couldn’t increase the production indefinitely. Thus, US President Joe Biden’s plan to visit Saudi Arabia earlier and urge a significant increase in supply has failed.
However, what OPEC+ won’t do, the US will. The EIA data shows that US crude oil inventories unexpectedly rose by as much as 4.5 million barrels last week, while the market had expected a decline of 629,000 barrels. Therefore, the reading could have caused a big surprise. Moreover, the EIA report shows that Americans are driving their cars this season less than in previous summers, especially compared to 2020, when Covid restrictions were still in place. If car traffic is less in an open country than in one in lockdown, that may show that US consumers indeed strongly feel the fuel price increases in their wallets.
Chance of fuel price declines at gas stations
As a result, a slight increase in supply with a noticeable drop in demand could lead to a decline in oil prices. It is also possible that demand will not recover soon. After all, Americans are likely to expect further interest rate hikes, raising loan instalments and interest on credit card debt.
Belt tightening Americans – is perhaps a ready-made recipe for further cooling of the US economy. By the way, it may also lead to lower fuel prices at gas stations in the US and the rest of the world.
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