The downward trend of fluctuant international petroleum prices has become the focus of attention in the last several months. Why does international petroleum prices constantly fall? Does this round of price declining mean that the last round increasing of petroleum price has ended, and petroleum price has already peaked and falls into a downward “track”? How much room is there for the decrease of petroleum price in the future?
International petroleum price has stabilized and rebounded since August this year. For example, WTI crude oil futures rebounded to be more than $95/barrel after falling below $90/barrel, and Brent crude oil once hit the $100/barrel mark; however, the good times did not last long. After a short rebound period, the international petroleum price declined again, showing signs of continuous falling. As of the data on August 17, international petroleum price has given back all the gains since the outbreak of the Russian-Ukrainian conflict in late February, and has also fallen back slightly: WTI crude oil hit the lowest closing price since January 25, and Brent crude oil also keeps the same price as that in mid-February.
On the whole, the recent falling trend of the international petroleum price is still the main theme of the international oil market, showing the characteristics of oscillating downward. At present, there are still many disturbance factors on the supply side of the international oil market. From the demand side, weak economic data from the world’s major economies has aggravated the market’s worries about an economic recession, which in turn affects the expectations of crude oil demand prospects, causing oil prices to continue to fall from highs. For example, aggressive interest rate hikes by the Federal Reserve have brought the possibility of a recession in the U.S. economy, causing investors to intensify selling on fears that demand for crude oil may decrease. To curb high level of inflation, the Federal Reserve has raised interest rates by the most in nearly 30 years. However, the Fed’s aggressive tightening policy is fueling growing speculation about a U.S. recession. At the same time, there are growing signs that the risk of a U.S. recession is rising.
Generally speaking, the United States is the world’s largest economy and the largest energy-consuming country. Once the U.S. economy declines or falls into recession, it will directly bring about a weakening of crude oil demand. Therefore, as the market’s worries that the U.S. economy may fall into recession continued to ferment, investors’ risk aversion increased and they sold crude oil, which brought a new round of decline in crude oil prices recently. In addition, the spare capacity of major oil-producing countries is still limited, and shale oil production is also weak, but Europe’s energy replenishment plan for autumn and winter is progressing smoothly. At the same time, Russia’s crude oil exports fell to the lowest level since March, indicating that the current round of oil prices is reasonable.
