Why is Oil Falling Today? US Fed Decision, China’s Fuel Demand, and Russian Crude Supplies Affect Market

Investing.com – Oil prices fell sharply during these trading moments, on Monday, as investors awaited the US Federal Reserve’s interest rate decision, while concerns related to the growth of fuel demand in China and increased Russian crude supplies affected the market.

Oil analysts expected price fluctuations to continue this week, after a two-week decline, due to fears of a US recession and disappointing China’s data, despite production cuts by the “OPEC +” alliance.

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They explained that crude oil ended last week in a relatively stable manner, as it was trading in a limited range, while the new week carries many US economic data with great impact, which is likely to restore excitement to global markets.

They attributed the continued market volatility to the possibility that the rise in inflation in the United States through the Consumer Price Index report will lead to another hike in interest rates by the Federal Reserve.

They indicated that expanding production cuts for the “OPEC +” alliance at the current June meeting was necessary with the continued decline in prices and uncertainty about demand, as weak economic data from China affected oil futures contracts, which fell by 11 percent in New York in last May.

This comes in conjunction with the US Department of Energy awarding contracts to five companies to supply more than 3 million barrels of crude oil to refill the country’s strategic petroleum reserve.

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Oil prices now

Brent crude fell by 2.85% to $72.67 a barrel.

While Texas crude fell by 3.15% to $67.92 a barrel.

The two benchmarks recorded the second consecutive weekly decline last week after disappointing Chinese economic data raised concerns about demand growth in the world’s largest importer of crude, which outweighed the price recovery due to Saudi Arabia’s decision to cut production by one million barrels per day in July.

Goldman Sachs (NYSE:) Outlook

Goldman Sachs Commodities Research cut its December price forecast to $86 a barrel from $95.

The WTI price forecast was also lowered to $81 a barrel from $89.

It said Russian and Iranian oil supplies “significantly” exceeded expectations despite Saudi production cuts.

It raised its forecast for global crude supplies in the second half of 2023-2024, excluding OPEC, by about 800,000 barrels per day.

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Statements by the Saudi Energy Minister

The Saudi Energy Minister, Prince Abdulaziz bin Salman, said yesterday, Sunday, on the sidelines of the Arab-Chinese Business Conference, that more agreements between Saudi Arabia and China will be announced in the near term.

The Saudi Energy Minister confirmed that the recent “OPEC +” alliance agreement included a comprehensive reform, while the alliance is working to confront “ambiguities” in the market.

The Saudi official also gave some insights into why Saudi Arabia is interested in maintaining a strategic partnership with China for various reasons, which revolves around the growth of oil demand within the People’s Republic of China, so of course Saudi Arabia should acquire part of this demand.

The Saudi ministry expressed its intention to invest in China because Saudi Arabia also has an ambitious program regarding converting crude oil into chemicals in partnership with Chinese investments as interested parties, explaining that Saudi Arabia does not pay attention to criticism related to Saudi-Chinese relations.

US Strategic Reserve

The US Department of Energy has awarded contracts to five companies to supply more than 3 million barrels of crude oil to refill the country’s Strategic Petroleum Reserve.

Damir Tsprat, Director of Business Development at the International Technic Group, believes that the prospects for global demand for crude oil look good, especially after the US Department of Energy announced that it had awarded contracts to buy three million barrels of crude oil to five companies to start refilling the strategic petroleum reserves. This entire purchase.

The Ministry of Energy was quoted as confirming that a barrel was purchased at an average of $73, which is less than the average of about $95 per barrel that the Strategic Petroleum Reserve crude was sold last year, explaining that the purchase was part of the three-part Strategic Petroleum Reserve renewal plan from the administration. American.

Peter Bacher, an economic analyst and specialist in energy legal affairs, agrees with the tightening of the global oil supply to support market balance and prevent price deterioration as a result of the slow recovery of Chinese demand and increased supplies from producers outside “OPEC +”, and that the US administration released 180 million barrels of oil last year. Crude from the Strategic Petroleum Reserve in order to lower gasoline prices after the Russian war.