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WTI crude oil for October delivery was last seen trading at $ 0.91 (or 1.43%) to $ 62.66 per barrel.
Following a two -day meeting of the Federal Open Market Committee, on Wednesday, the US Federal Reserve reduced the target limit for Federal Fund rate from 25 basis points to 4.00% to 4.25%.
Being a dollar-dollar commodity item, the demand for oil should increase to reduce the cost of borrowing. However, the effect has been silent, as the traders looked at the rate cut as “given” and focused on the new economic estimates of the central bank released on the same day. Summary indicated that core inflation is not expected to reach the 2% target of the Fed by 2028.
With this, the concerns of stagflation have been ruled that is now reducing the profit of rate cuts.
The data released by the Energy Information Administration on the oil reserves on Wednesday showed that distilled stockpiles indicated a 4 million barrels to soften the demand for fuel in the US, which is the largest oil consumer globally.
In the ongoing Russia -Ukraine conflict, Ukraine is targeting Russian oil refineries – recently Kirishi and Sharatov refinery. This year Ukraine killed minimum 10 refineries in Russia. The supply side dissolution in Russian oil has begun on the surface.
Goldman Sachs said that from August about 300,000 barrels per day, Russian laundering has been knocked offline. Analysts suggest that Russia would have lost one-fifth of its refining capacity.
US President Donald Trump urged the European Union countries to stop purchasing Russian oil. Saying that Russia will end the war, if the oil prices fall, Trump pressurized the European Union and NATO members-country to impose heavy secondary restrictions on the countries that buy Russian oil.
Trump reported that he put 25% “penalty tariff” on India at the top of 25% mutual tariffs, even though the US shares good relations with India.
OPEC+ Alliance decided to extend its collective oil production to 137,000 barrels per day from October last week. It is much less than 411,000 BPD growth for June/July and 555,000 BPD for August/September time frame.
With the demand to reduce and supply growth concerns, traders feel that crude oil may show a recession in short term.
The idea and opinion expressed here are the idea and opinion of the author and not necessarily Nasdac, Inc.
