Oil Rebounds Amidst U.S Recession Concerns
Oil rebounds amidst demand uncertainties in the United States and rising geopolitical tensions. Prices of crude oil trend positive despite recession fears in U.S, the world’s largest oil consumer.
ICE Brent crude rose to $76.38 per barrel, representing an increase of 0.1% from the closing price of $76.30 per barrel in the previous trading session.
The American benchmark West Texas Intermediate (WTI) traded at $73.12 per barrel at the same time, a 0.2% rise from the previous session that closed at $72.94 per barrel.
Oil prices increased on Tuesday following the concerns that rising geopolitical tensions in the Middle East, home to a vast majority of global oil, will spread to other regions damaging oil supply routes.
Analysts said risk premium in the oil markets increased following the assassination of the Palestinian resistance group Hamas’s political chief, Ismail Haniyeh in Tehran on July 31 after attending Iranian President Masoud Pezeshkian’s swearing-in ceremony.
Although Hamas and Iran have accused Israel of carrying out Haniyeh’s assassination, Tel Aviv has neither denied nor confirmed its responsibility.
ICE Brent traded to an intraday low of US$75.05 per barrels on Monday, although it recovered from these lows, settling just 0.66% lower on the day. The market has continued to see a recovery in early morning trading today.
Oil has been unable to escape the broader risk-off move seen across assets, as concerns grow over the potential for a US recession following some weaker macro data in recent weeks, ING commodity strategists Warren Patterson and Ewa Manthey said in note on Tuesday.
Analysts said this only adds to worries over Chinese demand. Investors have been exiting commodities in recent weeks, highlighted in positioning data and this has continued in recent days.
ICE data shows that aggregated open interest in ICE Brent has fallen by more than 8% since mid-June. This souring in speculative appetite comes despite oil fundamentals still looking supportive.
Offsetting some of the macro bearishness were reports that the Sharara oilfield in Libya has fully halted production with reports of protests at the site.
The oilfield has a production capacity of 300,000 barrels per day, although before the disruption it was producing around 270,000 barrels per day. In addition, markets are still waiting to see how Iran responds to Israel after it vowed retaliation for the assassination of Hamas’ political leader on Iranian soil.
In the US, the Biden administration filed an appeal after a federal judge reversed the White House’s temporary ban on new licenses for US LNG exports in early July.
At the start of the year, the Biden administration temporarily halted approvals for new LNG export projects to assess the impact on climate change, the economy and national security.
Meanwhile, several US personnel were injured Monday in a suspected attack on Ain Al-Asadmilitary airbase in western Iraq, according to the US media.
US Defense Secretary Lloyd Austin and his Israeli counterpart Yoav Gallant agreed that an attack by Iran-aligned militia earlier in the day on US forces at an airbase in Iraq marked a ‘dangerous escalation,’ the Pentagon said.
‘Secretary Austin and Minister Gallant agreed that today’s Iran-aligned militia attack on U.S. forces stationed at Ain al-AsadAirbase in western Iraq marked a dangerous escalation and demonstrated Iran’s destabilizing role in the region,’ spokesman Maj. Gen. Pat Ryder said in a statement. Fitch Downgrades Dangote Industries, Puts Ratings on Negative Watch
