WTI crude oil prices held around $78 a barrel amid concerns about the outlook for oil demand from China. The reason is, the Bamboo Curtain Country is still struggling with a surge in COVID-19 cases.
That situation has the potential to trigger the local government to tighten social restrictions again. This can certainly reduce the demand for oil from China
As we know that China is one of the largest importers of crude oil in the world. On the other hand, the G7 has recently relaxed the price limit for Russian oil exports.
This news further adds to the pressure on oil prices because it has the opportunity to increase the supply of that commodity from Russia in the market. Further updates will be essential for this commodity.
WTI dropped by 4.3%
Currently, investors are still cautious about European Union sanctions on Russian crude oil that will come into effect on December 5, as well as the OPEC+ meeting on December 4.
On Wednesday, the price of crude oil slumped. It was especially after G7 decided to apply the limit of crude oil price from Russia. Everything is worse for oil because the United States fuel stocks are beyond the analysts' prediction.
WTI dropped by 4.3% to the area of $76.81 per barrel yesterday. Besides that, the fuel stocks In America rose by 3.1 million barrel according to EIA or Energy Information Administration.
That was far from what the analysts' predict where they thought that the raise will be 383k barrel only. This raising stock was becoming a surprise for them.
Two Possibilities behind the Stock Increase
This rise in gasoline reserves came as a surprise. This increase in gasoline supply hints at two possibilities, between the possibility of demand falling, or indeed preparing reserves for the holidays.
It was said by Phil Flynn, an analyst at Price Futures group. The EIA data also showed crude oil reserves of 3.7 million barrels. It was for sure above the analysts' estimation.
Based on a Reuters survey, what the analysts predict was 1.1 million barrels. In addition, concerns about falling demand from China, which is the largest importer of crude oil, are further exacerbated by rising COVID-19 cases there.
Shanghai itself yesterday again tightened the restrictive rules. If the situation is worsening, that tight restriction may be done at the other areas too .
Inflation may Increase Again
A member of the Monetary Policy Committee of the Bank of England (BoE), Catherine Mann, yesterday said that she expects inflation to still be able to exceed the upper limit of the forecast.
It is especially the one published by the Bank of England earlier this month. Mann, who in a monetary policy meeting voted to raise interest rates sooner this year, said wages and price increases are accelerating too fast at the moment.
The BoE's forecast for November 3 shows that the inflation rate based on to the model implemented by the BoE. In the next two years, it should be below the 2% target.
However, analysts' forecasts which also include potential deviations to inflation projections shared a suggestion. There is at least a 28% chance that inflation is still likely to be above 3%.
UK political condition and It’s Impact
Man said that she was so confident that inflation will be more than three percent.. That opinion was said in a presentation at a conference held at King's College London.
He also still expects that sterling is at risk of weakening when viewed from the political situation in the UK. This is potentially weighing on the strengthening of the Great Britain currency against the USD.
As it is known, Britain has just come out of a political turmoil. That was followed by a fairly rapid, fastest change of Prime Minister in British history.
This was coupled with the rate of inflation that is still likely to rise. Those aspects could weigh on sterling if the BoE does not take appropriate monetary policy measures.