The price of crude oil is the cheapest in a month. WTI below $ 105 a barrel

WTI crude oil price today fell by more than 4 percent to $ 105 a barrel, hitting the lowest level in a month. This may be due to the increasingly negative outlook for the world economy and growing fears that rising US interest rates will slow demand. 

Federal Reserve since March, it has been tightening its financial policy and raising interest rates to control inflation, which in the US exceeds 8,6 percent. and is the highest in 41 years.

Summer fuel relief for Americans

Inflation is driven by, among others rising fuel prices. According to a survey conducted by CNBC increasing costs of refueling cars affect the decisions of US citizens to withdraw from planned vacation trips. This may limit the demand for fuels this summer season.

That's why the US president is scheduled to meet representatives of the seven major oil companies on Thursday as part of a campaign to cut prices. Joe Biden is expected to call for a gasoline tax holiday.

Not enough to patch the supply hole

Demand concerns still seem to be accompanied by supply shortages. Exxon Mobil and Vitol have warned that gasoline demand has not yet recovered to pre-pandemic levels, and when that happens, supply may not keep pace with demand.

Disruptions in gas supplies caused by Russia's invasion of Ukraine and production limitations of the countries OPEC have contributed to the rise in oil prices in recent weeks.

Let us remind you that on June 2 at the OPEC + meeting cartel members announced a revision of production targets for July and August. According to the EIA agency, crude oil production will average 29,2 million barrels per day (b / d) in the second half of 2022, which is 0,8 million b / d more than in the first half of 2022. In turn, the production of liquid fuels in Russia will drop from 11,3 million barrels / d in the first quarter of 2022 to 9,3 million barrels / d in the fourth quarter of 2023.

According to some analysts, the economic slowdown caused by interest rate increases is only a short-term constraint on soaring prices. On a larger scale, this will not solve the problem of supply drops. Thus, high oil prices may persist for a long time.