Experts now think the chance of a global recession is 35 percent: File Image/Pixabay
Like a needle stuck in the groove of a record, crude prices on Wednesday steadied due to two familiar elements whose effects cancelled each other out, ie: the positive effects of a larger than expected crude inventory draw in the U.S. being nullified by ongoing worries about the global economy.
Crude stockpiles decreased 2.7 million barrels last week according to the Energy Information Administration, a bigger drawdown than the 1.9 million barrels that analysts had forecast; however, gasoline stocks rose by 312,000 barrels, while distillate supplies grew by 2.6 million barrels.
No news event occurred on Wednesday to mitigate the positive outcome of the inventory drop other than media pundits keeping the issue of the U.S./China trade war front and center.
John Kilduff, founding partner, Again Capital
It looks like gasoline demand has peaked for the season
As a result, Brent rose 27 cents to settle at $60.30 per barrel, while West Texas Intermediate fell 45 cents to settle at $55.68 per barrel.
It's noteworthy that both benchmarks remain in the doldrums despite significant reductions in the volume of crude on the market: Washington disclosed that it has removed nearly 2.7 million barrels of Iranian oil from global markets daily as a result of its decision to reimpose sanctions on all purchases of Iran's crude.
Also, the Organization of the Petroleum Exporting Countries (OPEC), Russia, and other producers have been cutting 1.2 million barrels per day since the beginning of January to reduce global supply.
John Kilduff, founding partner at Again Capital, said, "It looks like gasoline demand has peaked for the season, and will only trend lower from here."
Ole Hansen, head of commodity strategy at Saxo Bank, remarked, "Crude oil remains stuck, with the relief rally in recent days not removing the fear that recession risks could still send the market lower again."
Stephen Brennock, analyst at PVM, said, "Market players continued to fret over recession fears and sluggish oil demand forecasts.
"A reprieve, however, may be on the cards... expectations are running high that hints of impending monetary stimulus will be plentiful."
Brennock is referring to growing expectations that global economies will take action to counteract slowing growth; China unveiled interest rate reforms which are expected to lower corporate borrowing costs, while Germany said it would be prepared to ditch its balanced budget rule and take on new debt to counter a possible recession.
But according to economists surveyed by Bloomberg, there's a 35 percent chance the U.S. economy will enter a recession in the next year amid ongoing tensions between the U.S. and China.