Brent crude fell after impressive US inflation data reinforced expectations that the Federal Reserve will continue to aggressively raise interest rates.
Global benchmark crude fell 2.4%, hitting its lowest level since March, while West Texas Intermediate also fell. On Thursday, markets were broadly weaker as the dollar resumed gains, weakening US-denominated commodities. Traders switched to expecting a historic one percentage point increase in the Fed’s interest rate later this month.
However, calendar spreads signal a shortage of supply, and Goldman Sachs Group Inc. stated that the market is „screaming” about the deficit. The bank said the week’s big sell-off was driven by low liquidity and technical factors, with the price of Brent oil down more than 20% from its June high.
US Gasoline Demand Falls in Midsummer
President Joe Biden arrived in the Middle East on Wednesday, just as a report showed that inflation jumped to a 40-year high last month, reflecting higher spending, including gasoline, which are a central issue in US elections. High U.S. gasoline prices may be starting to take a toll on consumption, with demand falling to its lowest level this time of year since 1996 last week.
“Concerns about the impact of high inflation on economic growth and demand for oil are growing markedly,” said Tamas Varga, an analyst at brokerage PVM Oil Associates Ltd. “Prices and structure are out of sync.”
Brent for September delivery lost 2.4% to $97.23 a barrel at 10:04 am in London. WTI for August delivery fell 2.8% to $93.59 a barrel.
U.S. gasoline demand fell to 8.06 million barrels a day last week, also lower than the same week in 2020, according to the Energy Information Administration. Excluding the same period two years ago, the four-week moving average of seasonal gasoline demand was the lowest since 2000. Crude oil inventories rose by 3.25 million barrels.
Resurgent outbreaks of Covid-19 in China have also weighed on the outlook for oil demand. The outbreak in Shanghai appears to be easing, but other regions are on lockdown and facing restrictions to curb the spread of the virus. There were 292 cases across the country on Wednesday.