Oil futures fell more than 5% on Wednesday to more than 5% against one-month price lows amid growing fears that the Fed's and other central banks' interest rate-raising policies in a bid to fight record inflation will slow economic growth and it even risks provoking a recession, which in turn reduces the demand for important energy raw materials.

Today's sharp price drop is also provoked by pressure from US President Joe Biden to reduce rising fuel prices, including pressure on major energy companies in the country by introducing the so-called "tax holiday" on fuels to help relieve drivers during peak summer petrol consumption.

At 10.00 a.m. Bulgarian time, Brent oil futures fell 5.1% to $108.80 per barrel, and US light crude oil futures WTI fell 6.5% to $103.50 a barrel. Both types of leading oil futures are reaching their lowest price levels since May 20 this year.

Brent oil chart (in dollars per barrel)

President Joe Biden is expected today to call for a temporary suspension of the federal tax of 18.4 cents per gallon on gasoline, a source informed Reuters.

On Thursday, seven oil companies are due to meet with Biden amid pressure from the White House to cut fuel prices as they make record profits.

However, Chevron CEO Michael Wirth said on Tuesday that criticizing the oil industry was not the way to reduce fuel prices. "These actions are not helpful in meeting the challenges we face," Wirth said in a letter to Biden, prompting a response from the US president that the oil industry was "too sensitive".

Despite concerns about inflation, oil demand is still on track to recover from pre-crisis levels with the Covid-19 pandemic, and supply growth is expected to lag behind consumption, maintaining the oil market to remain tight, as noted earlier this week by Dutch trade energy giant Vitol and US energy giant Exxon Mobil Corp.

"The market is still experiencing problems due to growing disruptions in Russian oil supplies, and European sanctions are yet to take effect," analysts at ANZ Research said, citing data showing that there has been a relatively limited decline in Russian oil exports to Europe since the beginning of Moscow's military invasion of Ukraine.

Meanwhile, oil refining capacity in the United States fell in 2021 for the second year in a row, according to the latest government figures released on Tuesday, as shutdowns for various reasons continued to reduce their ability to produce gasoline and diesel. Official figures show a drop in production capacity of 125,790 barrels per day last year, in addition to a drop of 800,000 barrels per day in 2020 when the crisis caused by the coronavirus pandemic was in full swing.

At the same time, supply disruptions caused by the war in Ukraine and the inability of OPEC to pump more crude oil due to insufficient investment are likely to limit the current decline in oil futures. Analysts say the slowdown caused by the Fed is a short-term solution to rising prices, but will not solve the problem of limited oil supplies.

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