Oil prices fall on weak demand
Surprise swelling of US crude inventories and Fed’s outlook hit oil price confidence
Oil prices have slumped in Thursday trading after Federal Reserve Chair Jerome Powell threw cold water on the hopes of a rapid recovery in the US economy, increasing fears for weakened oil demand.
By late-afternoon (UTC) Brent Crude Futures dropped 8.36 per cent to $38.22 per barrel. West Texas Intermediate Futures sank further, falling 9.67 per cent to $35.91.
Last week’s US job figures and the agreement by OPEC+ to extend its record breaking production cuts had stoked hopes that the commodity’s post-April rally would continue. Earlier this week, Saudi Aramco, the state-backed Saudi oil and gas firm, carried out the largest price hike in 20 years.
Such hopes have been seemingly dashed by the Federal Reserve. The central bank predicted that US consumers will continue to restrict their activity even after the lockdowns are lifted and outlined its belief that unemployment in the world’s largest economy will reach 9.3 per cent at the end of 2020.
A surprise jump in US crude inventories, from 5.7 million barrels last week, to a record high of 538 million barrels has also contributed to oil’s latest price plunge. Analysts had predicted the government to report inventories of around 1.45 million barrels.
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