Oil prices are experiencing significant declines during today’s Asian and European sessions. This week, the asset started strong, with bullish price movements but has lost most gains during today’s decline by 4.32%.
Overall the price has been declining since Jun. 9 after the price reached a new price high for the year. Since the price reached a high of $121.41 per barrel, the instrument witnessed a decline of 20.66%. However, according to analysts, the instrument is influenced by opposing factors and still bears the possibility of an upward trend and a further bearish price movement.
Over the past 24 hours, investors have focused on the latest crude oil inventories. The data confirmed by the Energy Information Administration put pressure on Crude and Brent Oil. In particular, oil reserves decreased by 0.446M barrels, and distillates — by 1.296M barrels.
In comparison, gasoline reserves in the USA immediately increased by 3.498M barrels, which worries investors since such a rapid drop in gasoline demand during the summer car season can mean serious problems in the national economy. The population probably cannot pay for fuel if the prices rise too much, threatening to put a dent in its demand.
In addition, investors are also evaluating the resumption of production in several fields in Libya. Previously Libya had been a major oil supplier to the global economy but has produced far less over the past decade due to conflicts and civil war. How much the country is looking to pump will determine the pressure on oil prices.
According to analysts, medium-term factors contribute to the continuation of the downward trend, but the long-term prospects still leave room for another bullish trend. The possibility of reducing the supply from Russia due to the growing economic sanctions imposed against the background of the escalation of the military conflict in Ukraine and the reluctance of OPEC to increase production significantly may create a shortage of energy supply. However, it should be noted that it also depends on the economic activity and the possibility of a recession. Both factors can potentially lower the level of demand.
The Federal Reserve is predicted to increase its Fund Rate by at least 75 basis points within the next week, and the European Central Bank has increased interest rates for the first time in 11 years. The ECB has also opted to increase its rates by 50 basis points rather than 25. Many traders will evaluate whether this will have the desired effect and lower demand and inflation.