Gasoline prices today (August 25): “Old habits die hard”

Oil prices plunged after a sudden turn at the last minute of the previous trading session. Oil prices are heading for a second week of decline.

World oil prices

Oil prices ended a volatile trading session on August 24 with a sharp stop following reports of falling oil inventories in Europe. Oil prices fell $1 throughout the session on concerns about falling demand and a strong dollar.

Oil prices continued to slide after a surprising comeback at the last minute of trading on August 24. Illustration photo: Reuters

According to Reuters, oil prices started to climb after Dutch consulting firm Insights Global posted data showing that diesel inventories at the independent storage facility of the Amsterdam-Rotterdam-Antwerp (ARA) refinery and storage center fell 3% in the latest week. However, this information only helped oil prices increase slightly after falling sharply for the previous three consecutive sessions.

Specifically, Brent crude oil price increased by 15 cents, equivalent to 0.18%, to 83.36 USD/barrel, while US WTI oil price increased by 16 cents, equivalent to 0.2%, to 79.05 USD/barrel. Oil prices continued to fall for most of the session, before recovering slightly in the last half hour of trading.

UBS analyst Giovanni Staunovo said that falling European refined product inventories and lower 2-year US Treasury yields could support oil prices, adding that volatility is likely to continue until investors get more clarity on the Federal Reserve's next move.

Fed officials and other global central bankers are gathering at the Jackson Hole symposium, with Fed Chairman Jerome Powell set to speak later today. Investor caution ahead of his remarks has pushed up the safe-haven dollar, making oil more expensive for holders of other currencies, dampening demand.

Earlier on August 23, Japan reported factory activity contracted for a third straight month in August. Eurozone business activity also contracted more than expected and the UK economy looks set to shrink in the current quarter.

US business activity edged closer to a slowdown in August, with growth at its weakest since February. But the data also showed that labor market conditions remained tight despite the Fed’s aggressive rate hikes.

“The US remains in a strong position but there are weaknesses and if rates stay high for longer, further cracks could appear,” said Craig Erlam, an analyst at OANDA.

“Perhaps this economic skepticism has contributed to the slowdown we have seen and may even have triggered a correction,” the analyst said.

The strong increase in the USD continues to support the "downhill" of gasoline prices. Illustration photo: Vanguardngr

On the supply side, despite US sanctions, Iran's crude oil output will reach 3.4 million barrels per day by the end of September, Iranian state media quoted the country's Oil Minister as saying.

US officials are also drafting a proposal to ease sanctions on Venezuela, allowing it to export more oil if the South American country holds a free and fair presidential election, according to sources.