Oil Barrel Dropped 5 Times in the Last 6 Economic Recessions: What to Expect from Brent Post-Pandemic, Russia-Ukraine War, Interest Rate Hikes, Inflation, and Social Isolation in Cities Responsible for 20% of China’s GDP

According to Your Money, the price of the commodity fell five times in the last six economic recessions. Despite the trend of the barrel to show negative variations, expectations for the next few weeks are that prices will remain high due to the high inflation, which, only in Brazil, is above double digits in the last 12 months. The drop will happen later with economic recovery, but before that, company stocks in the sector will suffer from instability.

The month of July has been marked by global recession fears, especially after cities in China responsible for over 20% of the country’s GDP (Gross Domestic Product) announced they would be going back to social isolation after new cases of the virus (source: Petrosolgas). The price of Brent oil has been unstable since then. The drop in the price of the barrel was 5% in just one month, below what economists estimated.

The destruction of demand from large global powers will cause developing countries to slow down and enter into economic crisis. The lack of jobs affecting more than 11 million unemployed people in Brazil alone, according to IBGE, is a clear example of this.

The rise in interest rates also leads to a loss of demand. However, it is the only way to control the variation of inflation by encouraging citizens to invest and “save” instead of “circulate money.” In Brazil, the Selic is at 13.25% and it is estimated to be raised to 3.75% in the first week of August with the new Copom meeting.

Recomendado para você

Oil and Gas

Major Oil, Gas, and Energy Event Will Take Place in Brazil: Macaé Energy Will Gather Petrobras, Equinor, Prio, Among Other Suppliers and Energy Executives for Business, Networking, and Employment Opportunities

The Technical Agenda and the Fair in the City of Macaé Should Boost Discussions on Investments, Energy Transition, and Development of the Oil, Gas, and Energy Chain in the National...

Paulo Nogueira

1

In The Last 30 Days, Brent Oil Fell 5%, Below Expected

The process of oil variation has been unstable since the outbreak of the war between Ukraine and Russia at the end of February, where U.S. President Joe Biden had been warning about suspicious Russian movements at the borders since early January. There was a spike in commodities with the risk of shortages due to the end of partnerships with the Russians, one of the largest exporters in the world.

According to experts, the biggest drop will initially happen in the long term for companies working with primary oil products, such as Petrobras, and not directly in commodities. On Tuesday, July 19, Petrobras stocks ended up 2%, with a total appreciation of 4% that month, below previous months.

The accumulated appreciation of Petrobras shares reaches 60% in the last 52 weeks, while in the year 2022 the company’s variation reached 24%, data that may indicate a slowdown. The instabilities in the stock prices usually occur after attempts by the federal government to intervene in fuel prices. Bolsonaro, the President of the Republic, has already expressed his opposition to the pricing policy. And, on Tuesday, the 19th, the company announced a new reduction in the price charged per liter of fuels, which reached 5%.

Joe Biden Creates Partnership With Saudi Heir and Can Control International Prices and Pressure on Brent Barrel

Last week, Joe Biden, President of the United States, met with Saudi heir Mohammed bin Salman to discuss the possibility of the country supplying oil to the United States. The expectation is that the partnership will reduce pressure on the barrel’s price and the fear of “shortages,” the argument used by Petrobras to increase its prices.

In summary, the price of oil tends to fall in the coming months, but before commodities, the stocks of companies in the sector will have negative variations.