Crude oil prices recorded another sharp intraday decline as global economic slowdown and concerns over Covid-19 resurgence, especially in China takes their toll on the market.
The West Texas Intermediate (WTI) dropped by as much as 7/09% as at Tuesday afternoon to trade at less than $97 per barrel with Brent crude losing over 7% to trade below $100 as Wall Street traded lower and the dollar rose, making commodities priced in the currency more expensive.
Dwindling liquidity has left prices vulnerable to sharper moves of late, with Brent futures last week recording their third-largest slump ever in dollar terms.
According to Bloomberg, bearish sentiment has filtered through commodities as rising virus cases in China and looming US inflation data stoke concerns about demand, outweighing fundamental market tightness.
Senior Vice President for Trading at BOK Financial, Dennis Kissler said, “Crude trading under extreme pressure this morning as a defensive posture continues with consumer sentiment still in a depressed mode along with a COVID resurface in China.’’
Despite growing fears of recession across some economies due to the energy crisis, several energy administrations admit that there might not be any reprieve as supply challenges are set to get worse.
The IEA’s Executive Director Fatih Birol said countries might not have seen the worst of a global energy crunch while OPEC’s first look at 2023 showed no relief from oil market tightness.
Crude has tumbled since early June on escalating fears the US may be heading for a recession as central banks hike rates aggressively to combat inflation.
President Joe Biden is scheduled to visit Saudi Arabia this week during a tour to the Middle East as he seeks to halt the high energy prices that is negatively impacting on the global economy.
The US believes OPEC has room to raise production should Biden’s upcoming visit to the region yield any agreements. France’s President will meet with the leader of the UAE next week to discuss oil supplies.
The oil market has been under pressure since this year, mostly due to the Russia-Ukraine war which has affected trade flows from that region.
Oil prices had surged since Russia invaded Ukraine, raising concerns about global shortages given the nation’s role as a key commodities supplier, especially to Europe.
High commodity prices have been a major contributor to surging inflation, which is at the highest in 40 years.
