Demand Fears In Hyperdrive, Crude Settles Below $100 For Third Straight Day

by Ship & Bunker News Team
Thursday July 14, 2022

For a third session in a row oil prices settled below $100 on Thursday, as traders worried about a possible rate hike in the U.S. that could curb inflation but also ruin demand.

After multiple reports showing inflation in that country is rising more severely than expected, talk intensified that the Federal Reserve could impose a 100 basis-point hike this month when it discusses the matter on July 26-27; the hike is expected to follow a similar move by the Bank of Canada.

West Texas Intermediate on Thursday settled down 52 cents at $95.78 per barrel, while Brent settled down 47 cents to $99.10 per barrel.

John Kilduff, founding partner at Again Capital, said, "Moves by the Fed will have an outsized impact on the market as we watch them try to digest new economic data about inflation."

The dollar index hitting a 20-year high also impacted trading: "Technical indicators are suggesting another round of fresh lows as the U.S. dollar continues to rule in driving oil price direction," said Jim Ritterbusch, president of Ritterbusch and Associates.

As for the inflation impact in Europe, in its quarterly forecasts the European Commission on Thursday cut its outlook for economic growth in the euro zone for 2022/23 and revised up its estimates for inflation; its outlook was said to be largely due to Russia's invasion of Ukraine.

However, the forecast isn't drastic for this year: the Commission now predicts growth of 2.6 percent for the 19-country currency bloc, slightly less than the 2.7 percent it had forecast in May; unfortunately, it believes higher energy prices will be felt more severely in 2023 and thinks growth as a result will be 1.4 percent instead of the previously estimated 2.3 percent.

For the 27-country European Union, the growth forecast was unchanged at 2.7 percent this year but revised down to 1.5 percent in 2023 from 2.3 percent.

Inflation in the euro zone is expected to peak at 7.6 percent this year before falling to 4 percent in 2023.

The irony continues to be the global supply market: Goldman Sachs Group Inc. said the market is "screaming" tightness and that this week's selloff has been driven by low liquidity and technical factors.

Rebecca Babin, senior energy trader at CIBC Private Wealth Management, added, "Crude is in free fall as demand data is softer and macro risk factors completely overwhelm the fundamentally tight physical market.

"Risks over the next few weeks look skewed to the downside, keeping even the most convicted bulls in wait-and-see mode."