Oil received more blows, driving prices lower. Rising COVID-19 cases in Asia is among the concerns affecting oil prices. Additionally, the possibility of rising inflation that could limit economic growth put oil prices in distress.
According to Reuters‘ report, Brent crude futures dropped 3.1% to $66.55 a barrel at 1355 GMT. This accounts a $2.16 loss. On Tuesday, it closed 1.1% lower after a brief rise above $70 earlier in the session.
On the other hand, US West Texas Intermediate (WTI) crude futures fell by 3.4% to 63.23, noting a $2.26 loss after a 1.2% decline on Tuesday.
Oil prices fluctuate, when will they stop dropping any lower?
Brent reached $70 for a moment before it fell back on Tuesday. The rise was, Reuters notes, due to the optimism over the reopening of the US and European economies. Both are known to be among the world’s biggest oil consumers. However, fears over slowing fuel demand in Asia as COVID-19 cases surged in several countries soon couldn’t maintain the price incline.
Quoted from Reuters, a market analyst for OANDA, Sophie Griffiths said, “While optimism surrounding the economic re-opening in the West helped drive Brent to $70, the move has proved unsustainable and somewhat irrational given the Covid picture in Asia”.
“The global picture for demand is probably the most divided it has been since the start of the pandemic,” Griffiths continued.
Still, Russian Deputy Prime Minister Alexander Novak assured that oil prices were stable. The market had roughly balanced helped by a demand that goes slightly oversupply.
Investors however remain wary over the possibility of inflation. Thus, some have opted to reduce exposure to riskier assets, including oil.
According to Westpac economist Justin Smirk, speculation over the possibility of inflation weighed on the future economic growth. This further feared to affect commodities demand.
Upon the issue, Smirk stated, “The Fed’s very serious (about holding rates low), but the market’s speculating about earlier movement”.
Previously, The Federal Reserve has indicated to be keeping interest rates on the current low level through 2021. Futures markets, though, showed that investors believe might start rising by September 2022.
Investors are also keeping a watch for the latest US crude and products stocks data from the U.S. Energy Information Administration due on Wednesday.