Oil costs fall to lowest level since July


The fight against inflation could get a boost – if a large drop in global oil costs continues.

Brent crude futures fell 4% on Tuesday to levels not seen since July on data that suggested demand would continue to fall in China – the world’s second-largest economy.

Brent is trading at $81 a barrel, while US crude also fell to $77, registering declines of over $3 each.

That left Brent futures on track to hit the market close to below $84 a barrel. barrel for the first time since prices rose in the wake of Hamas’ deadly attacks on Israel on October 7.

Analysts said the prospect of a wider conflict in the Middle East remains a concern for the oil outlook.

A set of scenarios released by the World Bank recently warned that a serious escalation involving major oil-producing nations risked a rise north of $150 a barrel. barrel.

But its base case for oil prices next year is around current levels.

Prices were only lifted in late June, from around the $72 level, by production cuts implemented by Saudi Arabia and Russia.

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Those output curbs are set to remain in place until the end of the year and helped take Brent upwards towards $100 at one point, putting a renewed strain on drivers at the fuel pumps in the process.

But downward pressure on oil has come from the downturn in China’s economy – hit hard by domestic problems and plunging demand for its exports in the West.

Updated forecasts for refinery activity in China indicated lower volumes were expected throughout November and December, putting further downward pressure on prices.

OANDA analyst Craig Erlam said: “Traders will remain on high alert for signs of a wider conflict emerging in the (Middle East) that could disrupt supplies, but fears appear to be easing.”

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Falling oil prices will be welcome in Western economies as they continue to battle the effects of inflation.

Some economists have warned that a new rise in oil prices risks a third wave of the inflation problem.

Price growth was driven first by economies reopening after COVID and then by the fallout from Russia’s invasion of Ukraine.

Higher oil costs not only make transport costs more expensive, but also large parts of the factory’s production.


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