Oil holds near US$100 after growth worries stoke mammoth drop

Oil steadied around US$100 a barrel, with Goldman Sachs arguing that a plunge driven by fears a recession will hurt demand was overdone.

West Texas Intermediate rose 0.8 per cent, while Brent added 1.5 per cent. Those gains were small compared to Brent’s decline of more than US$10 on Tuesday, its third largest ever in dollar terms. 

While that drop was borne out of concern of a global recession and technical selling, there’s been little change to market fundamentals. Nearby Brent futures are trading at a giant premium to later months -- indicating market strength -- while disruption to global oil production has been mounting, amid a risk to Kazkahstan’s oil exports. 

Oil has opened the third quarter on a volatile footing as concerns about a potential recession rattled financial markets. With central banks including the Federal Reserve jacking up interest rates to tame inflation, investors have been pricing in the consequences of a slowdown even as physical crude markets continue to show signs of vigor and the war in Ukraine drags on.