Crude oil prices could fall to $90 per barrel if the economies of the world's two biggest consumers continue struggling with growth, Bharat Petroleum's chairman told the Economic Times.
"Prices can touch $90 in two months if the US continues with inflation and low growth and China is unable to find fixes for its economic troubles. Economic woes in these two countries can affect demand," Arun Kumar said.
At the same time, however, Kumar suggested that oil demand could find support from record-high natural gas prices, which are prompting industrial consumers to switch to oil-fired generation.
Indeed, Germany's city of Munich last week restarted oil-burning units at two power plants in a bid to reduce its gas consumption in line with the EC's plan for a 15-percent cut in gas consumption across the European Union.
As of August 1, natural gas in Europe traded at above $199 per MWh, which was lower than the peak reached in March this year, but still prohibitively expensive for many gas consumers.
Oil prices, meanwhile, have been subdued lately by economic worries as various analysts and politicians debate whether the U.S. slipped into a recession or the definition of a recession needs a revision. Nobel laureate Paul Krugman suggested the word "recession" was irrelevant.
It appears to still be relevant for oil traders, however. Worry about the U.S. and China as well was the main reason for the latest decline in oil prices, along with the anticipation of this week's OPEC+ meeting.
The extended cartel met today in Vienna to discuss production for September. The group decided to raise production targets for September slightly, by 100,000 bpd. With a compliance rate of more than 300%, OPEC+ is unlikely to reach that target.
Meanwhile, "Russia's production is unlikely to drop anytime soon and so the overall global oil supply will remain unaffected in the coming months," Bharat Petroleum's chairman also noted.
By Irina Slav for Oilprice.com
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