Oil prices slide towards $99

SARAJEVO, (Patria) - Oil prices fell on Wednesday towards $99 as traders fear high inflation will prompt the US central bank to sharply raise interest rates, which could slow down the economy and demand for energy.

In London, the price of a barrel was $33 cents lower than at the close of trading yesterday, standing at $99.16. Yesterday, it closed trading down $7.61.

In the US market, a barrel was trading today at an almost unchanged price of $95.72. Yesterday, it closed trading down $8.25.

Prices in London closed yesterday below the $100 mark for the first time in three months, due to a strong dollar, strict COVID-19 containment measures in China, the world's leading importer, and fears of a slowdown in the global economy.

Despite tight physical market supply, investors have been selling oil in futures contracts, fearing that aggressive interest rate hikes could curb economic growth and thus oil demand.

Today, attention turned to the data that inflation in the US in June exceeded nine percent, reaching its highest level in more than 40 years, which, it is speculated, could prompt the Fed to raise interest rates by three-quarters of a percentage point by the end of the month.

- The inflation data today exceeded all expectations, and now there is no doubt that the Fed will be even more aggressive, said Naeem Aslam from Avatrade.

Traders are also monitoring the situation in China, which has increased COVID-19 testing in some cities this week.

- It is feared that this could lead to lockdowns, added Aslam.

As supply remains tight, the market will closely monitor the visit of US President Joe Biden to the Middle East. Biden is expected to ask Saudi Arabia and other Persian Gulf producers to increase production.

Today's focus will also be on the government report on US inventories last week. Analysts expect it to show a decrease in crude oil and gasoline inventories.

However, according to data from the American Petroleum Institute (API), cited by sources on Tuesday, crude oil inventories increased by about 4.8 million barrels, increasing pressure on prices.

Due to holidays in the Muslim world, the Organization of the Petroleum Exporting Countries (OPEC) did not announce the price of a barrel of its member countries' oil basket today either. Last Tuesday, it stood at $114.3.