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High oil prices and demand destruction: is the correlation real, at last?

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Oil price in decline - July 2022

The price of crude oil is falling and some analysts believe that the so-called demand destruction has set in - finally. Two major global economies, the US and UK,  are already in recession despite the questioning of its technical definition - judging by the most of the economic indicators, if not cherry-picked. The industries have been crying out for an audience with the authorities to show the gravity of the problem for months for states to chip in, in order to nip it in the but, but to no avail. Disproportionate focus on the war in Ukraine and the sanctions on Russia have finally damaged the Western economies, while Russia keeps making a clean killing thanks to high energy prices, despite being bruised by the unprecedented economic embargo. 

In addition, the state of the Chinese economy worries the crude oil markets too: the manufacturing PMI in China has fallen again in July, having recorded a rise in June. The significant fall, exacerbated by the frequent outbreaks of new variants of Covid-19 in China - and its rigid zero-Covid policy, appears to be taking its toll on the world's second largest economy - and the oil and gas consumer.

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