Repost:The near-certainty of analysts that the global economy is heading towards a slowdown if not full blown recession continued to haunt crude traders on Thursday, and as a result Brentfellbelow$90per barrel for the first time in six weeks.
A host of elements contributed to the bearish sentiment, including falling prices for crude cargoes in trading hubs fromHoustontoSingapore– compared to expectations that they would rise in reaction to theEuropean Union‘s impending ban on oil imports fromRussia.
The oil curve has also collapsed, and in theU.S.the market is close to morphing into a structure that signals oversupply.
Rebecca Babin, a senior energy trader atCIBC Private Wealth Management, added that “Front month time spreads – the backbone of tight markets – are the weakest they have been since March 2021, signalling demand concerns are real and investors should be cautious when buying the dip.”
Phil Flynn, senior market analyst atPrice Futures Group Inc., noted, “The market is really getting caught up for the potential of serious demand destruction, and we’re definitely seeing the mood shift to the downside.”
Capping all of this wasJPMorgan Chase & Co., which projected that the U.S. will enter a “mild” recession next year due to interest-rate hikes.
Brent on Thursday fell$3.08to settle at$89.78per barrel, down3.3 percent; West Texas Intermediate slid$3.95, or4.6 percent, to settle at$81.64per barrel.
Edward Moya, senior market analyst atOANDA,remarkedthat “It looks like we aren’t seeing an immediate escalation from the Russians [missile attacks] and that has tentatively removed some of the short-term supply risks.”
Moya made these comments followingPolandandNATOstatingthat a missile that crashed inside the Polish border was probably a stray fired byUkraine‘s air defenses and not a Russian strike, as initially reported by mainstream media.
ButStephen Innes, managing partner atSPI Asset Management, pointed out that concerns aboutChina‘s Covid policies are keeping markets grounded: “With COVID cases in China continuing to rise, especially as we move towards flu season, traders are left with little option to recalibrate positions reflecting the possibility of more lockdowns in heavily populated centers that hurt oil demand exponentially more than other areas of the economy.”
