Oil Down On The Return Of Recession Fears, But Russian Exports Rise

Meanwhile, exports continue to be frozen at Iraq ports: File Image/Pixabay

All it took on Tuesday to quash what might have been an emerging bullish run for oil was a strong U.S. dollar plus another suggestion of economic woes, both of which caused the commodity to drop  by over 2 percent.

Brent dropped by $1.96, or 2.4 percent, to settle at $80.77 per barrel, and West Texas Intermediate crude dropped $1.69, or 2.2 percent, to close at $77.07.

Phil Flynn, senior market analyst at Price Futures Group Inc., said, "Oil prices looked as if they were going to mount a rally before old banking worries re-emerged."

Flynn was referring to First Republic reporting withdrawals of over $100 billion, which caused analysts to resume concerns of a potential banking crisis.

Also, U.S. consumer confidence reportedly dropped to a nine-month low in April, feeding recession fears.

Yet more bearish sentiment was stoked by the U.S. Federal Reserve, the Bank of England and the European Central Bank planning to raise rates at their coming meetings, with the Fed's meeting scheduled for next week.

The general malaise all but obliterated the previous session's cause for optimism, namely China's expected boost in holiday travel and a corresponding inventory tightness.
  
Rebecca Babin, a senior energy trader at CIBC Private Wealth, said, "Longer-term investors aren't going make real bets until there is clarity around China's recovery and U.S. recession."

In other oil related news on Tuesday, shipments from Iraq's north and the country's Kurdish region remain halted, with some tankers leaving leaving its ports empty; however, these disruptions were counterbalanced by exports from Russia, which remained strong despite Moscow's earlier pledge to cut production.

Vessel-tracking data compiled by Bloomberg showed that Russia's crude oil shipments continued to average a high of 3.4 million barrels per day (bpd) in the week to April 21, despite the 500,000 bpd production cut promised by the end of this year.

Russia's crude oil exports were up by 72,000 bpd to average 3.46 million bpd on a four-week average basis.