Jakarta, CNBC Indonesia – Crude oil prices fell again this week due to recession issues. Thus, both West Texas Intermediate (WTI) and Brent crude oil posted declines in 4 of the last 5 weeks.
According to Refinitiv data, WTI oil slumped 7.2% to US$ 97.59/barrel, then Brent fell 5.5% to US$ 101.16/barrel.
WTI even touched US$ 90/barrel which was the lowest level since February 25, or the day after the Russia-Ukraine war started which sent energy prices soaring.
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Meanwhile, Brent oil even touched US$ 94/barrel, the lowest since February 21, or before the war started.
The Russo-Ukrainian war previously made Brent oil soar to almost US$ 140/barrel on March 7, which was the highest level since July 2008. However, since then Brent continued to decline.
Since hitting that nearly 14-year high until this week, Brent has fallen more than 27%.
The issue of a recession that is getting stronger due to high inflation in various countries has made crude oil prices plummet. When a recession occurs, business activity will decline, demand for crude oil will also decrease.
The United States (US) is the country that is estimated to be closest to experiencing a recession before it spreads to other countries.
Inflation in the US in June skyrocketed 9.1% again year-on-year (yoy), significantly higher than the previous month’s 8.6% and analyst forecasts of 8.8%.
With inflation high, the US central bank (The Fed) is expected to raise interest rates by 100 basis points to 2.5% – 2.75%, higher than the previous projection of 75 basis points.
The higher the interest rate, of course, the faster the recession will occur.
However, the decline in crude oil prices is still restrained, even rebound on Friday (15/7/2022) after Saudi Arabia was not expected to rush to increase its production level.
US President Joe Biden landed in Jeddah last Friday, and is expected to ask Saudi Arabia to increase its production capacity.
However, analysts see Saudi Arabia and other OPEC members not having the spare capacity to immediately increase crude production.
Attention is on the OPEC+ meeting on August 3, and the United States is expected to confirm OPEC’s commitment to increase production in the next few months.
An increase in production can certainly lower crude oil prices, which strengthens energy prices. So that inflationary pressure is expected to subside.
CNBC INDONESIA RESEARCH TEAM
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