Crude below $100– Anil Singhvi decodes factors triggering steep fall in oil prices

In the special edition of "Editor’s Take," Zee Business Managing Editor Anil Singhvi explained two main factors behind the sharp fall in crude oil prices, which slumped below $100 bn per barrel on Wednesday. According to Singhvi, the oil is taking support at $ 95-100 per barrel and it’s a relief for India. 

Oil prices fell in early Asian trading on Wednesday as US inventory data showed buildups in crude oil and refined products amid rising fears of a global economic slowdown, a Reuters report said. 

Brent crude futures dropped 68 cents, or 0.7%, to $98.81 a barrel at 0002 GMT. While US West Texas Intermediate crude declined 72 cents, or 0.8%, to $95.12, also the lowest in three months.  

Likely decline in demand amid the economic recession fear is impacting the crude prices, Singhvi said, and it is obvious that commodities including crude may see softness. However, the concerning factor is the way crude slips in percentage-wise, like 5-7% swing in crude has become normal, he added. 

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On the political front, US president Biden’s visit to Gulf in Saudi Arabia is also seen somehow impacting the crude oil price, the managing editor said, adding that this is a temporary factor, while the permanent factor is of course recession fears. 

Renewed COVID-19 travel curbs in China also weighed on the market. Multiple cities in the world`s second-biggest economy have adopted fresh restrictions, from business shutdowns to broader lockdowns, to rein in new infections from a highly infectious subvariant of the virus, Reuters said. 

On Tuesday the dollar index, which tracks the currency against a basket of six counterparts, also climbed earlier in the day to 108.56, its highest level since October 2002. 

Oil is generally priced in US dollars, so a stronger greenback makes the commodity more expensive to holders of other currencies. Investors also tend to view the dollar as a haven during volatility.