Oil Falls As Fear Of A Recession Outweigh Supply Constraint
Economic downturn worries outweighed supply constraints due to decreased output from the Organization of the Petroleum Exporting Countries. Hence, oil prices fell on Monday morning in Asia (OPEC).
By 01:23 AM ET (0523 GMT), Brent oil prices had risen 0.05 percent to $111.66. Meanwhile, WTI crude oil futures had risen 0.01 percent to $108.42.
CMC Markets analyst Tina Teng explained that the main negative reason that has restrained the rise in oil prices is recession worries. Data indicates that U.S. petroleum refinery capacity has increased. However, rising rates and a decline in consumer confidence have hurt the forecast for gasoline demand. Additionally, a strong dollar hurts all major commodity markets, including the price of crude.
Will The Oil Prices Fall?
U.S. consumer sentiment hit a record low in June. However, signals of economic deterioration in the country and internationally are becoming more obvious. Last week, the U.S. Federal Reserve reaffirmed its commitment to reducing inflation, raising worries that an impending recession may result from interest rate rises.
The supply of oil is still limited. In contrast to their planned rise of roughly 275,000 BPD, the output from the 10 OPEC members decreased by 100,000 barrels per day (BPD) in June to 28.52 million BPD. Energy markets have particular supply issues, which make being short a nerve-wracking experience, according to Commonwealth Bank commodities expert Tobin Gorey.
Nigerian and Libyan production declines cancel out Saudi Arabia’s and other countries’ gains. Moreover, Libya’s political upheaval threatens to further disrupt supply, making it less likely that OPEC will fulfil its recently increased production target, according to ANZ Research analysts.
The National Oil Corp reported last week that Libya’s exports have decreased to between 365,000 and 409,000 BPD or around 865,000 BPD below normal levels.
