Oil swings as recession fears and low liquidity spur volatility
BNN Bloomberg
Oil erased a second consecutive sharp decline as wider markets continue to price in the risks of a global economic slowdown.
West Texas Intermediate traded near US$105 a barrel after paring initial losses of over US$3 a barrel. Futures have shed more than 10 per cent in the last week. Warnings about a potential recession and economic slowdown have overshadowed oil market fundamentals that indicate a growing supply crunch. Crude’s recent swings have proven too volatile for many traders. Open interest across the main futures contracts has fallen to the lowest since 2015 in recent days.
“Future demand destruction from a possible looming recession is countering near-term real demand that remains very strong,” said Dennis Kissler, senior vice president of trading at BOK Financial. “As long as the fear of a recession remains, the near-term strong demand is keeping crude choppy.”
Updated statistics on the state of US inventories won’t be released this week. The Energy Information Administration’s stockpile report is delayed after a power disruption damaged some of the agency’s hardware.
