Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Crude Oil Lower on Recession Fears; Citi Sees $65/Bbl Oil

Commodities Jul 05, 2022 21:34
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters.

By Peter Nurse   

Investing.com -- Oil prices retreated Tuesday, weighed by concerns of a global economic slowdown, although further supply disruptions means the market remains tight.

By 09:15 AM ET (1315 GMT), U.S. crude futures traded 3.3% lower at $104.81 a barrel, catching up after Monday’s Independence Day public holiday in the United States, while the Brent contract fell 4.1% to $108.86 a barrel.

U.S. Gasoline RBOB Futures were down 3.5% at $3.5582 a gallon.

Crude has been hit by fears of a global recession, and this continued Tuesday after the Bank of England said the global economic outlook has “deteriorated materially” after surging commodity prices pushed up inflation, posing a further downside risk in months ahead.

Additionally, S&P Global’s composite purchasing managers index for the Eurozone fell to a 16-month low, implying growth of around only 0.2% in the quarter. Weakness in new orders and confidence suggests worse to come in the current quarter.

Crude oil could collapse to $65 a barrel by the end of this year and slump to $45 by end-2023 if a demand-crippling recession hits, Citigroup warned.

“The historical evidence suggests that oil demand goes negative only in the worst global recessions,” the Citi analysts said in the July 5 note. “But oil prices fall in all recessions to roughly the marginal cost.”

That said, losses are limited Tuesday following the news that Norwegian offshore workers began a strike that is expected to reduce oil production by 130,000 barrels per day from Wednesday, accounting for around 6.5% of Norway’s production.

Additionally, while the Organization of the Petroleum Exporting Countries and their allies including Russia, known as OPEC+, confirmed last week its previously announced plan for modest output increases in August, the group has struggled in the past to make good on these promises.

“OPEC+ producers have limited room to increase output significantly, and so are unable to provide much relief to the market,” said ING analysts, in a note. “OPEC production declined over June, with the bulk of members falling short of their output targets.”

This doesn’t mean that the political pressure on the group’s members to increase output will stop growing.

U.K. Prime Minister Boris Johnson called on the cartel to increase output more aggressively earlier Tuesday, and U.S. President Joe Biden is set to visit the Middle East later this month with energy prices likely to be at the top of the agenda.

Monday’s holiday means that the weekly crude inventory data from the industry body American Petroleum Institute, usually released on a Tuesday, will be delayed by a day.

Crude Oil Lower on Recession Fears; Citi Sees $65/Bbl Oil
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email