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Oil prices edge down, recession fears back in focus
Global Banking & Finance Review®
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By Emily Chow
SINGAPORE (Reuters) – Oil prices fell on Friday amid recession fears and a stronger U.S. dollar, though losses were capped by supply concerns after Moscow’s new mobilisation campaign in its war with Ukraine and an apparent deadlock in talks on reviving the Iran nuclear deal.
Brent crude futures fell 46 cents, or 0.5%, to $90.00 per barrel at 0630 GMT, while U.S. West Texas Intermediate (WTI) crude futures were also down 46 cents, or 0.55%, to $83.03.
Front-month Brent and WTI contracts were down 1.4% and 2.4%, respectively, for the week so far.
“In the wake of accelerating rate hikes by the major central banks, the risk of a global economic recession overshadows supply issues in the oil markets, despite the recent escalation in the Russia-Ukraine war,” said CMC Markets analyst Tina Teng.
“However, a sharp fall in the U.S. SPR and drawdown in inventories may still keep oil prices supported at some point as there is still an inevitable undersupply issues in the physical markets, while Iran’s nuclear deal is in stalemate,” she said, referring to crude oil in the U.S. Strategic Petroleum Reserve which dropped last week to its lowest since 1984.
Following the U.S. Federal Reserve’s hefty 75-basis-point increase on Wednesday for a third time, central banks around the world also followed suit in hiking interest rates, raising the risk of economic slowdowns.
“Crude prices remain volatile as energy traders grapple with a deteriorating demand outlook that is still vulnerable to shortages,” said Edward Moya, senior market analysts at OANDA, in a note.
“Supply risks and tight market conditions should give oil some support above the $80 level, but a quicker tumble to a global recession will keep prices heavy.”
A senior U.S. State Department official said that efforts to revive the 2015 Iran nuclear deal have stalled due to Tehran’s insistence on the closure of the U.N. nuclear watchdog’s investigations, easing expectations of a resurgence of Iranian crude oil.
(Reporting by Laila Kearney in New York and Emily Chow in Singapore; Editing by Leslie Adler, Kim Coghill and Ana Nicolaci da Costa)
Brent crude oil is a major trading classification of crude oil originating from the North Sea. It serves as a benchmark for oil prices globally and is used to price two-thirds of the world's crude oil.
West Texas Intermediate (WTI) is a grade of crude oil used as a benchmark in oil pricing. It is sourced from the United States and is known for its light and sweet characteristics.
A recession is a significant decline in economic activity across the economy that lasts for an extended period, typically visible in GDP, income, employment, manufacturing, and retail sales.
The U.S. Federal Reserve, often referred to as the Fed, is the central bank of the United States. It regulates the U.S. monetary and financial system, aiming to promote maximum employment and stable prices.
The Strategic Petroleum Reserve (SPR) is an emergency fuel storage of the United States, maintained by the Department of Energy, designed to provide a supply of crude oil in case of major disruptions.
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