As recession worries froze markets and outweighed a fundamentally tight supply market, oil was headed for its worst trading day in nearly three months.
The most since March 9 was seen in the decline of West Texas Intermediate crude futures, which reached 10%. Markets experienced a risk-off mood due to growing worries that a global economic slowdown will ultimately hurt demand. Since traders left the market in response to Russia’s invasion of Ukraine, which reduced liquidity, crude has been prone to abrupt swings in price. The most recent decline occurred as the dollar rose and stocks declined. In the event of a recession, crude could drop to $65 this year, according to Citigroup Inc.
As central banks aggressively raise interest rates, there are growing concerns that the economy will slow down, which has caused oil prices to decline over the past month. Nevertheless, physical barrels command astronomical premiums. On Tuesday, the kingdom increased its official selling prices to Asia. In August, the company’s flagship Arab Light crude will cost $9.30 more than the local benchmark, an increase of $2.80.
Crude oil prices have plummeted, according to Fawad Razaqzada, a market analyst at City Index, as concerns about weakening demand are beginning to outweigh worries about a limited supply. Many of the world’s leading economies are predicted by an increasing number of analysts to experience negative growth in the upcoming months, which will push the US into a recession.
Saudi Arabia raises oil prices in Asia as demand remains strong
Shanghai launched widespread Covid testing in nine districts after finding cases over the previous two days, raising concerns about the recovery of demand in one of the biggest oil-consuming nations in the world. This move only served to fuel recessionary fears. More lock downs might be implemented as a result of the additional testing, as the city reported several infections on Sunday and Monday.
The prospect of a global economic slowdown has put pressure on futures, but key market timespreads are still strong, showing that there is strong demand for supplies in the near term. Recently, a strike in Norway and a disruption in Libya’s supply have made that strength even stronger.
Retail gasoline prices in the US have decreased from a record high of over $5 per gallon in mid-June, which is good news for Biden. According to data from auto club AAA, pump prices were close to $4.80 on Sunday after declining for 21 straight days, the longest losing streak in more than two years.
