The price of a barrel of oil declined globally by about 1% during trading today, Monday, June 12 (2023), for the third consecutive session, amid fears of a decline in demand due to the increase in interest rates in many countries, which indicates a rise in inflation and heralds a global economic recession.
This comes as investors await the results of the US Federal Reserve meeting this week, to learn about the expectations of increasing interest rates during the coming periods.
Concerns about the growth of fuel demand in China and the increase in the supply of Russian crude also affected the price of a barrel of oil globally.
The global price of a barrel of oil today
By 07:04 a.m. GMT (10:04 a.m. Mecca time), the price of benchmark Brent crude futures – for August 2023 delivery – fell by about 1.06%, to $74 a barrel.
Meanwhile, US West Texas Intermediate crude futures – for July 2023 delivery – fell by 1.07%, to $69.42 a barrel, according to figures seen by the specialized energy platform.
The global price of a barrel of oil fell by more than 1.5%, at the end of trading on Friday, June 9 (2023), after a volatile session, to continue to decline for the second day in a row, which prompted it to record its second weekly loss.
Oil price analysis
Disappointing Chinese economic data raised concerns about demand growth in the world’s largest crude importer, offsetting higher oil prices boosted by Saudi Arabia’s decision to cut production by 1 million barrels per day in July.
“The price of a barrel of oil globally is stuck in a clash between two opposing forces, downward expectations for fear of monetary deflation and bullish speculators who expect inventories to decline in the second half of 2023,” said Francisco Blanch, an analyst from Bank of America Global Research, Bank of America Global Research.
Blanche added: “The bears will retain control for the time being, as oil prices struggle to rise until the Fed eases its tightening in interest rate hikes.
Bank of America Global Research still expects Brent crude to average around $80 per barrel in 2023.
interest rates
Interest rate hikes by the Federal Reserve boosted the dollar index, making dollar-denominated commodities more expensive for holders of other currencies and affecting prices.
Most market participants expect the US central bank to leave interest rates unchanged when it concludes its two-day monetary policy meeting next Wednesday.
Suganda Sachdeva, CEO and Chief Equity, Currency and Commodity Strategist at ACMC Investments, said: “All eyes are now focused on two major factors that will influence the direction of the price of a barrel of oil globally. First, the US inflation reading due out on Tuesday will be closely analyzed by by market participants to look for clues about the general economic climate.
“Secondly, the Fed’s policy outlook for the coming year will guide the course of oil prices,” Sachdeva added, according to Reuters.
Global oil price forecasts
On the supply side, Blanche said that while Saudi Arabia has cut oil production four times in the past year, Russian supplies have not declined with the sanctions in a way that has had less of an impact on production.
Russian oil exports to China and India have grown despite the implementation of the EU embargo and the G7 price cap mechanism that began in early December.
Goldman Sachs cut its forecast for the price of a barrel of oil globally due to higher-than-expected supplies from Russia and Iran, and raised the supply forecast for 2024 for producers and Venezuela by a total of 800,000 barrels per day.
The bank’s forecast for the price of crude oil by the end of December 2023 is $86 a barrel for Brent, down from $95, and $81 a barrel for WTI, down from $89.
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