Oil price falls again as economic worries dominate the sentiment
The price of crude oil fell on Monday when the markets opened for business and it has since been back on the static trend despite the substantial production cuts by the OPEC+.
Although analysts hoped that the significant crude draw announced by the API, American Petroleum Institute, on Tuesday would push the prices up, it did not materialize. Nor did the slight rise in price of LNG, liquified natural gas, boost it, as it used to do for the past few years; the price of natural gas, in fact, rose as a cold weather front is currently sweeping across the northers hemisphere that has resulted in temperatures plummeting to single digits - once again.
As of 09:15 GMT, the prices of WTI, Brent and LNG recorded $77.22, $80.77 and $2.26 respectively.
The fact that the price of crude oil defies the over-the-top price hikes predicted by some analysts, clearly shows that the persistent worries over the economic outlook casts a long shadow over the usual factors that potentially can sway the prices of the commodity; the failure to boost the oil price by the significant fall in the US crude inventories is a case in point; the US is the world's top consumer of crude oil after all and its numbers really matter as far as oil prices are concerned; they are not trivial.
The news about yet another run on a US bank, meanwhile, has left the markets jittery. The First Republic Bank has announced that it lost over $100 deposits from savers in light of the two US banks that collapsed recently - Silicon Valley Bank and Signature Bank.
Although $30bn cash injection by its lenders calmed the markets to some extent, the persistent worries remain, leaving investors in a lurch before dispensing with their money.
Russian oil, meanwhile, appears to be flowing unhindered by man-imposed 'viscous drag' wherever it is welcome. The owners of the Indian refineries are rubbing their hands with glee as the commodity, on their watch, flows along the paths of least resistance to where it is in great need.
China is on a buying spree too. Since the world's second largest economy relies on the discounted Russian oil, its traditional suppliers in the Middle East clearly are already feeling the pinch and the latter resort to production cuts in order counter the inevitable impact.
The blow must have been amplified by the fact that three South Asian buyers have already cut down on their quotas of import from the Middle East owing to the corresponding economic troubles. Nepal, Sri Lanka and Pakistan, in this context, are in a league of their own as far as their low foreign reserves are concerned.
Since India and China so far managed to keep the threat of retaliatory Western sanctions at bay, many developing countries in other regions, especially in Africa, may be tempted to snap up Russian oil at steep discounts.
It is blatantly obvious that the world's second and third largest consumers of oil use intermediaries to get round the shipping and insurance barriers put up by the West, when it comes to transportation of oil through sea routes.
It is assumed that crude oil from Iran and Venezuela reach the markets in the same way despite the sanctions. Iran has been boasting about its steady rise in revenues from oil exports despite the heavy sanctions by the West.
All in all, the diminishing spending power of the consumers, worsened by sky-high inflation, has become a key factor that determines the price of crude oil - and its demand for that matter.
In this context, taking the US crude inventory data in isolation in order to gauge the price movements of crude oil is a meaningless statistical short-cut to misplaced complacency.
