Ana sayfa » Oil prices drop amid rising global recession risks and demand concerns from COVID-19 restrictions

Oil prices drop amid rising global recession risks and demand concerns from COVID-19 restrictions

The market largely ignores the tightening supply outlook following the OPEC+ announcement for the time being

by BUNKERIST

Oil prices fell for the third time on Wednesday as investors worried about rising global recession risks and tightening COVID-19 restrictions in China will impact fuel demand.

Brent crude futures fell 51 cents, or 0.5%, to $93.78 a barrel as of 0033 GMT. West Texas Intermediate (WTI) crude was down 69 cents, or 0.8%, at $88.66 a barrel.

Both indicators fell 2% in the previous session.

The International Monetary Fund (IMF) on Tuesday lowered its global growth forecast for 2023 and warned of an increased risk of a global recession.

But the IMF has urged central banks to continue their fight against inflation, even as investors fear that policymakers’ borrowing costs could rise too quickly and too high, triggering a sharp economic downturn.

It is said that the US Federal Reserve should continue to tighten its monetary policy, as it has not yet been able to control inflation.

The dollar rose broadly overnight after a senior Bank of England official told pension fund managers to finish rebalancing their positions by Friday when the British central bank will end its bond-buying program.

A stronger dollar puts pressure on oil and other risky assets as it makes dollar-denominated commodities more expensive for holders of other currencies.

Traders are cautiously awaiting the release of US CPI data on Thursday. Warmer-than-expected data could bring investor sentiment back to extremes, intensifying existing recession fears and putting more pressure on oil prices.

The oil market is also under pressure from the tightening of COVID-19 restrictions in China, the world’s second-largest oil consumer.

Major Chinese cities like Shanghai and Shenzhen stepped up testing for COVID-19 and tightened restrictions after infections soared to their highest level since August.

Chinese officials state that there will be no relaxation in COVID-19 policies despite worsening the demand situation.

On the supply side, US crude inventories are estimated to have increased by 1.8 million barrels in the week to October 7, after falling the previous two weeks, according to a preliminary survey.

Inventory data is one day late this week as Monday is a holiday. Industry data from the American Petroleum Institute (API) will be released at 2030 GMT. The U.S. Energy Information Administration (EIA) will release the data at 3 PM GMT on Thursday.

Last week, the Organization of the Petroleum Exporting Countries and its allies, including Russia, decided to cut production targets by 2 million barrels per day. However, the market now largely ignores the tighter supply outlook following the OPEC+ announcement.

The US says the OPEC decision will have consequences for Saudi Arabia.

EU countries are looking for a way out of the deadlock on gas price ceilings. The energy ministers of the European Union (EU) countries will come together today and reconsider the proposal to impose a ceiling price on natural gas, on which they could not agree.

Polish pipeline operator PERN said a leak has been detected in the Druzhba oil pipeline. The French refineries strike continues despite the threat of demand.