Crude headed for third straight weekly loss on recession fears
Front-month ICE Brent has slumped $3.64/bbl lower on the day, to $90.84/bbl at 09.00 GMT. The futures contract is heading for a 2% drop on the week.
PHOTO: Crude slumps nearly 4% on the day as recession fears spook traders. Getty Images
Upward pressure:
The US-Iran nuclear deal appears to have hit a dead end with both parties refusing further negotiations. Iranian President Ebrahim Raisi told Al Jazeera that US sanctions must be lifted to reach a nuclear agreement, and there must be guarantees in place to ensure their “lasting removal”.
EU foreign policy chief Josep Borrell believes that US-Iran negotiations are in a “stalemate” and does not see a breakthrough any time soon.
JPMorgan’s global head of energy strategy Christyan Malek reiterated his $150/bbl price forecast during an interview with Bloomberg. As oil demand outpaces supply, renewables, coal, and gas supplies will be insufficient to replace crude, he adds.
Downward pressure:
Fears of an impending global recession have spooked oil markets, despite an upbeat OPEC oil demand outlook for 2023. Adding fuel to the fire is a recent World Bank report warning of a recession next year caused by an aggressive wave of policy tightening.
World Bank president David Malpass fears these trends will persist with long-lasting consequences. He said “growth is slowing sharply, with further slowing likely as more countries fall into recession.”
Investors are gearing up for an aggressive Fed rate hike in next week’s Federal Open Market Committee (FOMC) meeting. Nomura forecasts that the Fed will raise its key interest rates by 100 basis points, while Goldman Sachs and JPMorgan predict a 75-basis point increase.
“Oil fundamentals are still mostly bearish as China’s demand outlook remains a big question mark and as the inflation fighting Fed seems poised to weaken the U.S. economy,” OANDA analyst Edward Moya said in a note.
By Konica Bhatt
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