WTI Falls to Early $80 Range
China's Exports Weaker Than Expected...Recession Concerns
Further Decline Expected if Iran Nuclear Deal Reached
[Asia Economy Reporter Hyunwoo Lee] International oil prices have fallen to their lowest level in eight months, dropping to the low $80 range, which is the level before Russia's invasion of Ukraine. This is attributed to weaker-than-expected Chinese export data and concerns over a recession due to the possibility of further interest rate hikes by major central banks such as those in the United States and the European Union (EU). There are also forecasts that if the restoration negotiations of the Iran nuclear deal (JCPOA - Joint Comprehensive Plan of Action), which is reportedly close to being finalized, succeed and Iranian oil returns to the market, international oil prices could fall further to around $65 per barrel.
On the 7th (local time) at the New York Mercantile Exchange (NYMEX), West Texas Intermediate (WTI) crude oil plunged 5.69% from the previous session to $81.94, marking its lowest level since January 11 this year. At the London ICE Futures Exchange, Brent crude oil traded at $87.78, down 5.44% from the previous day. Brent crude also fell below the $90 mark for the first time since February 8.
The main factor driving down international oil prices on this day was concerns over a Chinese economic slowdown. According to Hong Kong's South China Morning Post (SCMP), China's customs office previously announced that China's export volume in August was $314.92 billion, an increase of only 7.1% year-on-year. This figure was significantly below the market expectation of 12.8%, and it is analyzed that the prolonged COVID-19 lockdowns severely impacted productivity.
The possibility of a recession due to Europe's energy crisis is also gradually increasing. At the G7 finance ministers' meeting on the 2nd, Russia strongly opposed the agreed price cap on Russian crude oil, raising concerns that energy pressure such as gas supply cuts will continue.
Russian President Vladimir Putin warned at the 7th Eastern Economic Forum held in Vladivostok on the 7th, stating, "Countries that participate in the US-led price cap on Russian crude oil will receive nothing from us if it goes against our economic interests," adding, "There will be no gas, no crude oil, no coal, no gasoline."
The possibility of further tightening by major central banks has also heightened recession concerns. While the US Federal Reserve (Fed) and the European Central Bank (ECB) are expected to implement a 'giant step' by raising benchmark interest rates by 0.75 percentage points or more at once this month, the Bank of Canada unexpectedly raised its benchmark interest rate by 0.75 percentage points on this day.
Amid overall recession concerns, the possibility of a JCPOA restoration deal is also expected to continue the downward trend in oil prices. Tamas Varga, chief analyst at PVM Oil Associates, a UK energy brokerage firm, explained in an interview with OilPrice.com, "If US sanctions on Iran are lifted and Iran returns to the oil market, international oil prices could fall to around $65 per barrel by the second half of next year."
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