Global crude oil prices have fallen further to touch the three-month low due to a weak demand outlook over growing concerns of a recession.
Ever since the conflict broke out in Ukraine, the supply chain disruptions in oil have persisted, causing a rapid rise in crude oil and other essential commodities’ prices. Prior to the conflict, crude oil was around USD 90 per barrel and rose to as high as USD 115 in less than a week in late February.
A brief decline in prices was observed at the end of March, and it went below USD 100 at the beginning of April.
The latest fall in prices could be attributed to rising fears of a possible recession, along with the aggressive monetary policy tightening by various central banks. These factors are essentially leading to weaker demand for crude oil, and thereby contributing to the fall in their prices.
Renewed COVID cases and fresh lockdowns in China, which may reduce economic activities, are among the reasons which can be attributed to the decline in oil prices.
Amid growing concerns about inflation, the US Fed raised its benchmark interest rate by 75 basis points at its latest meet. That followed a 25 basis points increase in March and a 50 basis points jump in May. In total, the US central bank has raised 1.5 percentage points on a cumulative basis. Experts believe aggressive rate hikes is likely to continue in the upcoming meetings, which in turn may cause a recession in the US economy.
In India, retail inflation has been over the Reserve Bank of India’s upper tolerance band of 6 per cent for the sixth consecutive month in a row in June.
India is a large importer of crude oil, and this rising global crude oil prices had put an upward pressure on domestic inflation.