A fall in oil prices is contributing to decrease inflation, adding justification to the expected rebate this week in interest rates by the US central bank. Last week, West Texas Intermediate oil prices fell below $70 per barrel, a 15 percent decrease since last July. This led to the announcement by Saudi Arabia and seven other members of the Organization of Petroleum Exporting Countries of the continuation of production cuts in around 5 million barrels per day, until de end of this year.
By contrast, on the rest of the supply side, oil production has increased among several countries of the Americas, nonmembers of the Organization, such as Brazil, Canada, Guyana and the United States, compensating for the production cuts.
On the demand side, the slowdown of the Chinese economy has been decisive. According to the Paris-based International Energy Agency, in China oil demand growth has decreased, causing “a profound impact on oil markets.” (The Wall Street Journal 09/13/24). For the last 20 years, China was consuming half of the increases in world oil production, at a rate of about 1 million barrels per day, which contrasts with a monthly average of 280,000 barrels per day between last April and July. Also contributing to the reduction in China’s oil demand is a slowdown in the housing market and an increased utilization of electric vehicles.
*International analyst and consultant, former Director ECLAC Washington. Commentator on economic and financial issues for CNN en Español TV and radio, UNIVISION, TELEMUNDO and other media.
