For the first time in six months, the price of crude oil on the global market fell considerably in the global market as the trading week began on Monday, August 15th. Consequently, the price of gasoline and other processed petroleum products also fell for the 61st consecutive day.
The price for US benchmark West Texas Intermediate fell by 5% to settle at $87 per barrel, the lowest it has been since January. Meanwhile, the price per barrel for global benchmark Brent crude also fell by 5%, settling at a six-month low of around $93.00.
A Fringe Benefit of the China Crisis?
This most recent drop in oil price came on the heels of the most recent economic reports from China which show that the country’s economic growth remained stunted throughout July.
Ongoing city-wide lockdowns in keeping with Beijing’s zero-Covid policy are seen as one factor which has slowed the Chinese economy. Contributing factors include uncertainty in the country’s domestic property market and fears of a global recession. As a result, the People’s Bank of China is trying to boost consumer demand through an unexpected cut in interest rates.
Can We Expect the Price of Oil to Drop Further?
Craig Erlam, an analyst for foreign exchange brokerage Oanda, remarked that the reopening boost was both uninspired and short-lived, going so far as to blame China’s less than stellar economic performance for the significant drop in the price of oil.
He added that current figures raise concerns regarding the demand for oil in light of China’s unwavering commitment to its zero-Covid policy despite the glaring impact it now has on its economy.
Erlam also said that we could expect the downward pressure on oil prices to get more intense over the next several weeks, though other experts predict a recovery in prices towards the end of the year.
According to some industry watchers, the price of oil and petroleum products may go even lower if Iran agrees to a new nuclear agreement, resulting in the addition of at least one million barrels a day in exports.
However, some experts say that the price of oil and fuel is less important now than they were in the previous century. This is mostly because automotive technology has led to the production of more fuel-efficient vehicles. Likewise, the growing number of people working from home means a considerable reduction in the demand for automotive fuel.