Oil prices continue to decline and touch pre-war levels in Ukraine

Oil prices fell more than 5% for a short period yesterday, Thursday, reaching levels not recorded since before the start of the war on Ukraine, as a result of fears of a recession that threatens the demand for black gold, in the context of record inflation in the United States and the euro area.

At 14:15 GMT, the price of a barrel of Brent North Sea oil, the benchmark in Europe for September delivery, decreased by 3.67% to reach $95.93.

The price of a barrel of West Texas Intermediate crude oil for August delivery decreased by 4.40% to reach $92.04.

Fears of slowing demand affected profits recorded after the war in Ukraine, when oil prices rose sharply and reached levels not seen since the 2008 economic crisis.

Thus, oil prices returned to the levels recorded before the invasion of Ukraine, when the price of a barrel of Brent ranged between 95 and 99 dollars and the price of a barrel of West Texas oil between 90 and 94 dollars.

However, prices are still up about 22% over the year, as at the beginning of the year and before the start of the war on February 24, supply disruptions and the possibility of a Russian invasion of Ukraine caused prices to rise sharply.

Oanda analyst Craig Arlam commented that "recession fears are once again the driver" of the decline in prices.

On Thursday, the European Commission lowered its forecast for growth in the euro area for 2022 and 2023 to 2.6 percent and 1.4 percent, compared to 2.7 percent and 2.3 percent expected so far due to the increasing impact of the war in Ukraine.

Inflation has reached historically high levels due to the Russian attack and the Western sanctions that led to it.

The European Commission raised its forecast for consumer price inflation to 7.6 percent in 2022 and 4 percent in 2023, from 6.1 percent and 2.7 percent previously estimated.

Spi analyst Stephen Innes asserts that Wednesday's publication of the US CPI for June "has enhanced the possibility of a significant Federal Reserve hike (interest rates) to slow the US economy."

Prices continued to rise in June in the country and the inflation rate reached 9.1% at its highest level since November 1981. This sharp rise threatens growth, as consumption is the main driver of the economy in the United States.

Analyst at PVM Energy Tamas Varga believes that with a new rate hike “the economy should contract” and growth should gradually slow down, “which will have an inevitable impact on oil demand”.

And raising interest rates will support the dollar more, which has reached unprecedented levels in decades against the yen and the euro, which affects the purchasing power of investors in the oil market who use other currencies.

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