Drops of oil, as testified by Hawkish Powell, heighten fears of a recession

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(Bloomberg) — Oil has fallen, Federal Reserve Chair Jerome Powell testified before a House committee raised fears of an impending recession.

West Texas Intermediate fell to nearly $104 a barrel with prices down more than 10% over the past week. Powell said his commitment to fighting inflation was “unconditional.” Warnings of a possible recession and economic downturn have clouded market fundamentals, which point to a growing supply crunch. Recent oil swings have been too volatile for many traders. Open interest in major futures contracts has fallen to its lowest level since 2015 over the past few days.

“The future destruction of demand from a possible looming recession is hampering near-term real demand, which remains very strong,” said Dennis Kissler, senior vice president of trading at BOK Financial. “As long as recession fears persist, strong short-term demand for oil is a concern.”

Updated US inventory statistics will not be released this week. The Energy Information Administration’s inventory report was delayed after a power outage damaged parts of the agency’s hardware.

As a result, markets must rely on US industrial governance to analyze weekly inventory data. The US Petroleum Institute said oil inventories rose 5.6 million barrels last week, while gasoline inventories rose, according to people familiar with the data.

Over the past two weeks, oil has quickly given up gains in a volatile quarter as investors have sought to gauge the direction of the global economy and its impact on commodities. According to Citigroup Inc. (NYSE 🙂 there is about a 50% chance that the global economy will succumb to recession. and Deutsche Bank AG (NYSE :).

There is still little consensus among the big banks about the prospects for oil. Goldman Sachs Group Inc (NYSE :). He said Tuesday that demand is still outstripping supply and warned that the Fed “can’t push commodities forward.” Citi sees oil falling this year and beyond.

Refined product markets — where there have been larger gains — have seen limited relief so far. Oil futures in Europe closed more than $57 a barrel above oil on Wednesday, a record in 2011 numbers

© 2022 Bloomberg LP

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