No Complaints Here, But Why Is The Oil Price Suddenly Falling?

No Complaints Here, But Why Is The Oil Price Suddenly Falling?
Carl Hazeley

over 1 year ago1 min

The price of a barrel of oil (specifically Brent crude) shot up to a high of $128 in February when Russia invaded Ukraine, and it hasn’t dropped below $95 ever since. Until Thursday, that is.

Some commodities analysts are blaming the drop on “growing concerns over oil’s fundamentals”. In other words, they think investors are now more worried that there’ll be a recession-driven dropoff in demand than they are about a shortage of the slippery elixir. That seems like a fair assessment: investors are increasingly aware that the Federal Reserve (the Fed) will continue to hike interest rates, which typically slows down spending, corporate investment, and in turn economic activity, reducing demand for oil.

With data out on Wednesday showing US inflation at its highest in 41 years, the Fed could jack up rates even more than analysts are expecting this month, accelerating a slowdown that’ll knock the oil price harder still. So you’ll want to keep your eyes firmly on the US central bank and its next move…

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