Aug 5, 2022 - Economy

Crude oil is falling on signs of weak demand

Data: FactSet; Chart: Axios Visuals

U.S. crude prices continue to tumble as stockpiles of oil and gas climb.

Why it matters: Falling energy prices could help lower the next round of inflation readings, reducing pressure on the Federal Reserve to continue the rate-raising campaign that clobbered the stock market during the first half.

Driving the news: U.S. benchmark West Texas Intermediate crude oil closed below $90 a barrel for the first time since February, before the Russian invasion of Ukraine set off a near crisis in global energy markets.

  • Recent reports from the Energy Information Administration showed rising stockpiles of oil and gasoline, hinting at a slowdown in demand.
  • OPEC, the global oil cartel, also decided on Wednesday to boost production, albeit modestly.
  • Benchmark gasoline futures prices are also down sharply this week. If sustained, that should ease prices at the pump (now averaging just over $4) in the coming weeks.

Yes, but: Goldman Sachs commodities analysts wrote in a recent note to clients: "The world is still facing a generalized energy shortage that spans the entire energy complex — from oil to natural gas and even to coal — due to both demand and supply factors that are unlikely to ease in the coming months."

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