Americas News
Oil Extends Losses As Recession Fears Dominate Analytical Circles
The rate of oil prices plummeting compared to the previous session increased on Friday, with recession fears fully seizing traders as central banks around the world vowed to escalate interest rates in a bid to fight inflation.
West Texas Intermediate fell $1.82 to $74.29 per barrel and Brent plummeted $2.17 to $79.04 per barrel, in a continuation of concern that the stance of the banks will tip economies into recession.
Canadian crude flowing into the U.S. thanks to some sections of the Keystone Pipeline being repaired added to the bearish sentiment, and was unaffected by an announcement from the White House that it will start buying crude to replenish strategic reserves (a paltry 3 million barrels earmarked for February compared to the 180 million that were released throughout 2022).
JPMorgan Commodity Research analysts said, based on projections, that they expect initial purchases of around 60 million barrels over the first half of next year.
In fact, the White House's announcement barely registered as talk of recession heated up: Robert Yawger, director of energy futures at Mizuho, remarked, "The talk around the campfire has suddenly become all about demand destruction in the face of a recession.
"The economic situation is less than stellar; not today, but we are drifting in the direction of testing $70 per barrel WTI again, and things could get very ugly from there."
The European Central Bank (EBC) and the Bank of England previously argued that inflation (which many say was caused chiefly by two years of governments paying entire populations to stay at home during the lockdowns) requires strict monetary policy tightening, and the rates at the end of the tightening cycle could end up higher than initially estimated.
The ECD stated, "interest rates will still have to rise significantly at a steady pace to reach levels that are sufficiently restrictive to ensure a timely return of inflation to the 2 percent medium-term target."
A strategy team at Saxo Bank on Friday noted that "Given the current focus on recession potentially hurting demand, a supply side struggle may not positively impact prices until the second quarter, and with that in mind, the price of Brent may settle into a range below $90 until then."
