In the context of the massive cost-of-living crisis in the UK, consumers will be interested to note that the price of oil and other commodities are among the assets that have most fallen in value on AvaTrade over the past week – perhaps suggesting a long-awaited correction to pricing on the wholesale market.
For example, last week saw crude oil hit a six-month low while in the UK, oil has dropped down to £74 a barrel. According to Naeem Aslam, Chief Market Analyst at AvaTrade, the price of the commodity is currently plummeting as a result of the following:
“Looking at our most falling table this week* shows that oil instruments made up the entirety of the top five. This can be explained by fears that a recession is looming ever closer.
“Oil prices have been increasing for a number of months, largely due to the ongoing war between Russia and Ukraine. The conflict has limited the supply of the commodity coming from Russia, leaving countries struggling to cope with the demand for oil having lost a key supplier.
“In the event of a recession taking place, the demand for oil is likely to drop, causing oil prices to come tumbling down from their giddy highs. It looks like traders currently holding oil are looking to sell now in order to avoid a loss when prices crash.”
Of course, this doesn’t mean that these price drops will immediately translate into lower prices at the pump or from electricity providers.