The The price of a barrel of West Texas Intermediate (WTI), Ecuador’s crude marker, closed this Friday, September 23, below $80 for the first time in more than seven months, that is, before the Russian invasion of Ukraine.
Gripped by fears of a global recession, the WTI for delivery in november fell 5.68% in the Friday session alone, and closed at $78.74. After shooting up to the $130.50 for WTI, when the Russian invasion of Ukraine began, crude oil has fallen considerably since the beginning of the summer. “Markets are increasingly convinced that we are headed for a global recession,” said Andrew Lebow of Commodity Research Group.
Meanwhile, Craig Erlam, an analyst at consultancy Oanda, said that “widespread monetary tightening over the past two days fuels fears of a hit to growth.”
The price of Ecuadorian crude oil has also been falling in recent months. According to figures from the state-owned Petroecuador, the theoretical price of Ecuadorian crude as of September 21 stood at $75.04, but it could go down more considering the international behavior of this September 23.
In any case, the company indicated, at the moment the average for a barrel of Ecuadorian crude oil between January and July has been $93.1. This is a figure above the price set for 2022 in the general state budget, which was almost $60.
For him Ecuadorian budget it is vital to keep prices high, as this guarantees higher revenues to the treasury. However, on the consumer side, the fall in prices could also mean more moderate prices for free-price fuels such as super premium (which will be marketed from the fourth week of October) and ecoplús, which is already on sale. in the country, in a pilot plan. The lowest fuel prices they also imply a lower cost of subsidies.
Ecuador’s oil production has also been on the decline. This September 23, total production was 490,830 barrels. Of these, 381,901 from Petroecuador and 108,928 from private companies. The total figure represents about 7,000 barrels less production compared to what the Government took at the beginning of its administration.
Tamas Varga, an analyst at PVM Oil Associates, said that “recession fears, new rate hikes and the consequent strength of the dollar prevail over geopolitical tensions. The US Federal Reserve raised rates by 75 basis points on Wednesday, as central banks around the world followed suit with hikes of their own, raising the risk of an economic slowdown. The US Federal Reserve raised rates by 75 basis points on Wednesday, with central banks around the world following suit with hikes of their own, raising the risk of an economic slowdown.
Oil gains will be limited as long as the dollar is strong, although the upcoming referendum in eastern Ukraine could further heighten tensions between Russia and the West, especially if Ukrainian allies provide additional help for Ukraine to recapture these territories.
Despite this behavior, analysts think that the price could rebound soon. “With an unlikely nuclear deal with Iran, the end of the releases of strategic oil reserves and the imminent reduction of Russian imports by the European Union, everything is ready” for a massive supply infarction, with a consequent increase in oil prices, according to Stephen Brennock of PVM Energy. (YO)