Oil Slides on Recession Worries, Rising Dollar
Oil prices weakened early on Friday on recession fears in the United States and some European counties amidst the surging dollar. On Friday, West Texas Intermediate crude for September delivery was last seen down US$1.58 to US$88.92 per barrel, while October Brent crude, the global benchmark, was down US$1.95 to US$94.64.
Despite a big drop in US oil and gasoline inventories reported this week by the Energy Information Administration, demand worries continue to press prices on expectations higher interest rates imposed to combat inflation will result in recession.
Concerns over the health of China’s economy and the potential return of Iranian exports should the 2015 nuclear accord be renewed are also weighing on oil. READ: Treasury Return Softens as Demand for OMO Bills Rises
“The market is in search of near-term upside catalysts. The recession fears are well acknowledged, but the bullish catalysts such as the return of China or supply degradation from Russia remain elusive,” RBC Capital Markets commodity strategist Michael Tran said in a note.
A surging dollar is also affecting prices, with the ICE dollar index rising 0.54 points to a month-high 108.02. Still, tight supply and Europe’s push to replace Russian oil and gas are expected to offer price support in the coming weeks.
“Crude oil, in a downtrend since June, is showing signs of selling fatigue with the technical outlook turning more price friendly while fresh fundamental developments are adding some support as well.
“The energy crisis in Europe continues to strengthen, most recently due to lower water levels on the river Rhine preventing the movement of barges carrying coal and fuel products such as diesel.
“The result being an increased gas-to-fuel switching supporting the demand outlook for crude oil,” Ole Hansen, head of commodity strategy at Saxo Bank, said in a note. # Oil Slides on Recession Worries, Rising Dollar
