Oil prices sharply fall for the second week in a row

SARAJEVO, (Patria) - Oil prices on world markets fell sharply last week, the second in a row, as the slowdown in the growth of the world's largest economies leads to a weakening of demand for energy.

The price of a barrel on the London market fell by 8.7 percent last week, to 87.62 dollars, while on the American market, a barrel fell by almost 10 percent, to 80.08 dollars.

The fall in prices is a consequence of the slowdown in economic growth, as demand for oil is also weakening due to this.

Traders are most concerned about the further increase in the number of covid-19 infections in China, which has dashed hopes that the world's largest oil importer will lift all corona restrictions in the short term and thus contribute to the growth of energy demand.

Last week, Beijing and some other large cities reported the highest number of new infections since the beginning of the pandemic.

"The increase in the number of new cases of covid in Beijing and other cities has reminded us that we should not expect a change in the growth trajectory of the economy and oil demand in the world's largest oil importer anytime soon," said Tamas Varga of PVM.

Due to restrictive measures against the spread of the virus, the growth of the world's second-largest economy has been slowing down for a long time.

Further slowdown in the growth of the American economy is also expected, given that the central bank there, the Fed, is announcing further interest rate increases due to high inflation.

The Organization of the Petroleum Exporting Countries (OPEC) again lowered its forecast for global oil demand growth in 2022 last week, for the fifth time since April, citing covid-19 in China, high inflation, and interest rate hikes in major economies.

The International Energy Agency (IEA), on the other hand, raised its forecast for demand growth this year and reminded that the EU embargo on the import of Russian oil by sea comes into force on December 5, which means that a replacement must be found for about 1.1 million barrels of oil per day.

However, in 2023, demand growth should be hampered by unfavorable economic trends, the IEA estimates.