Global Oil Prices Weaken: Here's What's Driving It

Global crude oil prices corrected downwards in trading on Wednesday, September 14, 2022, at 16:20 WIB. Brent crude was traded at US$93.9 per barrel, down 0.09% compared to the previous day's trading.

Trading of Brent crude oil today is expected to range from a low of US$91.94 per barrel to a high of US$93.68 per barrel.

Meanwhile, West Texas Intermediate (WTI) crude oil was traded at US$76.08 per barrel, up +0.06%. Citing Investing.com, Brent crude oil prices began to rise since Tuesday morning (September 13).

The movement of global oil prices is overshadowed by the announcement of US inflation data, which serves as a benchmark for the Federal Reserve's subsequent interest rate policy. According to CNBC, the US Department of Labor reported that the US consumer price index rose 0.1% last month after being unchanged in July.

Fed officials will meet next Tuesday and Wednesday, with inflation well above the US central bank's target of 2%.

"The Fed may have to raise rates faster than expected, which could lead to a 'risk-off' sentiment in crude oil and further strengthening of the dollar," said Dennis Kissler, Senior Vice President of Trading at BOK Financial.

Oil is generally priced in US dollars, so a stronger greenback makes the commodity more expensive for holders of other currencies. In addition, renewed Covid-19 restrictions in China, the world's second-largest oil consumer, are also weighing on crude oil prices.

The number of trips taken during China's three-day Mid-Autumn Festival holiday decreased, with tourism revenue also falling as Covid-19-related restrictions discouraged people from traveling.

Meanwhile, concerns about tighter supplies still loom over the market. Morgan Stanley says that while oil inventories are quite tight, they are offset by current demand.

"The structural outlook for the oil market remains tight, but for now, this is offset by cyclical demand challenges," Morgan Stanley said in a note.

US Strategic Petroleum Reserve (SPR) fell by 8.4 million barrels to 434.1 million barrels last week, the lowest since October 1984, according to government data released on Monday (September 12).

(read: Global Oil Production Increases, Will Prices Fall?)