Oil extends fall below US$100 as recession fears mount
BNN Bloomberg
Oil continued its decline as record U.S. inflation and disappointing earnings from Wall Street intensified fears of a recession.
West Texas Intermediate settled below US$96 a barrel on Thursday. Earlier, futures breached US$91 a barrel, hitting the lowest level since late February when crude began its ascent into triple digits. Broader markets recovered from the day’s lows after Federal Reserve officials calmed traders expecting an even more aggressive pace of rate hikes after a hotter-than-expected monthly inflation report. Oil futures have been in decline since early June on escalating fears the US may be pushed into a recession.
Nonetheless, global oil supply remains strained, as can be seen in timespreads showing a wide premium for immediately available barrels. Goldman Sachs Group Inc. said the market is “screaming” tightness and that this week’s selloff has been driven by low liquidity and technical factors.
“Crude is in free fall as demand data is softer and macro risk factors completely overwhelm the fundamentally tight physical market,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Management. “Risks over the next few weeks look skewed to the downside, keeping even the most convicted bulls in wait-and-see mode.”