Yet demand forecasts are more robust than ever: File Image/Pixabay
Analysts in the previous session remarked that sentiment remains sour within the crude market sector, and this proved again true on Tuesday with recession fears causing oil prices to plummet to a three-month low.
Specifically, a combination of dwindling liquidity and ongoing concern over China reacting to a handful of new Covid cases by restricting travel and closing businesses yet again resulted in West Texas Intermediate shedding almost 8 percent to settle under $96 per barrel for the first time since early April.
Brent settled $7.61, or 7.1 percent lower, at $99.49 per barrel, its lowest since April 11; WTI plummeted $8.25, or 7.9 percent, at $95.84.
Expectations for healthy global economic growth...are expected to boost consumption of oil.
Since their peak this year in March, Brent and WTI have declined 29 and 27 percent respectively.
Rebecca Babin, senior energy trader at CIBC Private Wealth Management, pointed out that, "The decimation of other commodities has also reduced risk appetite for crude even in a supply-constrained market."
Recession fears have caused hedge funds and other money managers to sell the equivalent of 110 million barrels in the six most important petroleum-related futures and options contracts in the week to July 5.
And yet, the idea of demand destruction remains purely hypothetical: Tuesday also saw premiums for North Sea oil bid at the highest since at least 2008, a solid show of strength, while Fatih Birol, executive director of the International Energy Agency, said nations "might not have seen the worst" of the global energy crunch.
Additionally, the Organization of Petroleum Exporting Countries (OPEC) said in a report released on Tuesday that it expects global oil demand growth to exceed the increase in supplies by 1 million barrels a day next year.
The cartel went on to forecast that global demand will expand by 2.7 million barrels per day (bpd) next year, bolstered by growth in emerging economies, while supplies outside OPEC will increase by 1.7 million bpd.
The report also stated that, "In 2023 expectations for healthy global economic growth amidst improvements in geopolitical developments, combined with expected improvements in the containment of COVID-19 in China, are expected to boost consumption of oil."