By Adedapo Adesanya
Brent crude dipped by 5.7 per cent or $4.56 to $108.18 per barrel on Wednesday as the market fears a looming recession would drive down global oil demand.
Also, the price of the US West Texas Intermediate (WTI) crude was down by 6.24 per cent or $5.26 during the session to settle at $102.77 per barrel as analysts project that the action taken by the US Federal Reserve to rein in inflation with aggressive interest rate hikes may not produce the desired effect and will actually lead to a recession within a year or a year and a half.
Investors are continuing to assess how worried they need to be about central banks potentially pushing the world economy into recession as they attempt to curb inflation with interest rate increases.
As this happened, oil markets remain concerned that rate hikes in the US and other economies would stall an economic recovery and dampen fuel demand.
According to the US central bank chief, Mr Jerome Powell, on Wednesday, the Federal Reserve is not trying to engineer a recession to stop inflation but is fully committed to bringing prices under control even if doing so risks an economic downturn.
Moreover, the strong US Dollar is also weighing on oil prices, as a strong greenback makes oil purchases more expensive for holders of other currencies.
A rising US Dollar could impact the level of imports in oil-importing countries.
Prices were also dampened as the administration of Mr Joe Biden of the US remains locked in a dispute with the US oil industry over what led to a $5 a gallon fuel price in America, the world’s largest oil consumer.
This is coming as the American president is pushing for a temporary federal gas tax holiday.
Mr Biden called on US Congress to pass a three-month suspension of the federal gasoline tax to help combat record pump prices and provide temporary relief for American families this summer.
The market looked at it that even if the gasoline tax was suspended, retail prices would remain high, making it difficult to stimulate demand.
The American Petroleum Institute (API) reported a build this week for crude oil of 5.607 million barrels, while analysts predicted a draw of 1.433 million barrels.
It is the first build of over 5 million barrels since mid-February, according to API data.
The build comes as the US Department of Energy released 6.8 million barrels from the Strategic Petroleum Reserves in Week Ending June 17.
US crude inventories have shed some 68 million barrels since the start of 2021 and about 11 million barrels since the start of 2020, according to API data.
The market will be waiting for the official data from the Energy Information Administration (EIA) due to be released later on Thursday.
