Meanwhile, OPEC maintains confidence in China's economic recovery: File Image/Pixabay
JC O’Hara, chief technical strategist, MKM Partners
If buyers don’t...support oil at $70, we can see an air pocket lower to $62
The by now predictable routine of demand fears triggered by inflation and the failure of Silicon Valley Bank in the U.S. prompted traders on Tuesday to extend crude's losses, this time by over 4 percent to a three month low.
Ironically, the fears were kindled by what could be described as news that was less calamitous than initially predicted, with the U.S. Consumer Price Index rising 0.4 percent in February from 0.5 percent in January: that slight slowdown has analysts now predicting that the Federal Reserve will raise its benchmark rate by just a quarter of a percentage point next week, down from a previously expected 50-basis points, and deliver a same-sized hike in May.
Brent on Tuesday fell $3.32, or 4.1 percent, to settle at $77.45 per barrel, while West Texas Intermediate fell $3.47, or 4.6 percent, to settle at $71.33.
Edward Moya, senior market analyst at OANDA, explained crude traders' mindset by remarking, "The Fed's tightening work is not done just yet and the chances are growing that they will send the economy into a mild recession, and risks remain that it could be a severe one."
JC O'Hara, chief technical strategist at MKM Partners, warned, "If buyers don't show up soon and support oil at $70, we can see an air pocket lower to $62."
More news that was less severe than expected on Tuesday came in the form of the Organization of the Petroleum Exporting Countries' (OPEC) monthly report, which maintained its forecast for global oil demand to increase by 2.32 million barrels per day (bpd), or 2.3 percent, in 2023.
The cartel based its projections in part on higher oil demand in China, whose citizens are returning to hotels, restaurants and some shops but choosy about their patronage, meaning growth will be gradual (at 710,000 bpd) rather than sudden.
In other oil related news on Tuesday that presumably will please those who think the rush towards green energy has come at the expense of petroleum's efficiencies, the White House approved the controversial Willow oil drilling plan in Alaska, one day after unveiling protections for over 16 million acres in the region.
The $8 billion plan will produce about 600 million barrels of oil over 30 years; ConocoPhillips will develop three well pads within the National Petroleum Reserve-Alaska, a 23 million acre area that is the largest expanse of public land in the U.S.