Oil Tumbles on US Recession Worries, Weak Demand
Oil prices tumbled on Wednesday as traders focused on recession worries following interest-rate hikes last week, while a United States President Joseph Biden Administration proposal for a temporary waive of the US gasoline tax offered some support for demand.
Market data shows that West Texas Intermediate crude for August delivery was last seen down US$6.11 to US$103.41 per barrel, the lowest since May 9.
Also, August Brent crude, the global benchmark, dropped US$5.78 to US$108.87. The drop comes as investors move away from risk assets, with stock markets in Europe falling and futures pointing to a weaker open on US exchanges.
Last week’s 75-basis point hike to US interest rates by the Federal Reserve and the promise of more to come as inflation surged to a 40-year high is raising recession fears.
A move by the Biden Administration to request Congress temporarily suspend the US fuel tax to lower gasoline prices is also seen as affecting prices, as the US president continues to press oil producers to increase gasoline supply even as the country’s refineries operate near their capacity.
“Concerns about a recession and tomorrow’s meeting between US oil industry representatives and US President Biden are being cited as the reasons for the renewed price slide. READ: Oil Falls over OPEC+ Output Plan, U.S Crude Reserve Release
“Biden had harshly and publicly criticised refineries last week, accusing them of producing too little gasoline and taking advantage of the record-high crack spreads to pocket profits at the expense of car drivers.
“A number of market participants clearly believe that the oil industry will comply with Biden’s wish and expand the supply of gasoline significantly. The fact that this will hardly be possible given the limited spare refining capacities is another matter,” Commerzbank analyst Carsten Fritsch said in a note.
The Energy Information Administration’s Weekly Petroleum Status report, normally out Wednesday morning, is delayed by a day to the US Juneteenth holiday. #Oil Tumbles on US Recession Worries, Weak Demand