The price of crude oil fell below $100 in the markets this week, a trend that is inherited from the performance of the last week. As of 14:50 GMT, WTI and Brent recorded $96.02 and $99.26 respectively.
At present, crude oil markets are not short of negative sentiments: there is a strong probability that the major global economies, including that of the US, will slide into recession; the European economies are staring into the abyss of a major disaster that exacerbated by the impending gas shortages; the crisis in Ukraine is getting ominously worrying on daily basis; the risk of Covid-19 is a hot topic again across the globe despite the prevailing complacency; there are signs that the Chinese economy is struggling to get back to where it was at the beginning of the year.
Based on the obvious headwinds against the global growth, analysts have been predicting a decline in demand for crude oil; the latest data from the API, American Petroleum Institute, meanwhile, shows a consistent crude oil inventory build for two successive weeks.
According to the API, there is a crude inventory build of 4.762 million barrels during the last week, although its own estimate for eh same period was just 1.933 million barrels. For the week before the last week, the crude build was 3.825 million barrels.
The EIA, US Energy Information Administration, meanwhile, released its own data highlighting a yet another significant crude inventory build; it says there was 3.3 million crude build for the week ending July 8.
Last week, however, there was a significant release of crude oil from the US SPR, Strategic Petroleum Reserve, though; it was 6.9 million barrels.
In this context, it is difficult to completely associate the crude build with the fall in demand. The release of crude oil from the SPR, however, shows that it has the potential to affect the market sentiments - to some extent.
There has been a similar consistent crude build for two consecutive weeks in February. It, however, did not last long; there was s steep fall in crude inventories after that.
In short, in the post-pandemic world, the US crude inventories did not become a reliable factor to gauge the future market movements; it will be much more difficult in the coming months, when the West try hard to isolate a major global producer, Russia, on economic front; it will be far more challenging for the latter in the next few months, when colder months set in in the northern hemisphere.
The fact that the price of LNG, liquified natural gas, did not come down in proportion to that of the fall in price of crude oil shows the real anxieties in the European markets over dwindling Russian supplies; rationing gas for the consumers in some European countries is already under discussion.
If the US pressurizes the European countries to get bolder against Russia, the former will be under obligations to provide the latter with reliable alternatives, not to let their economies grinding to a disturbing halt.
Analysts, in this context, pin their hopes on President Biden's visit to the Middle East that may result in more oil taps being opened in the major oil producers.
