5.9 C
London
Sunday, December 4, 2022
HomeBreakingOil dips with growth concerns weighing on rangebound market

Oil dips with growth concerns weighing on rangebound market

Date:

Related stories

spot_imgspot_img


Oil fell as traders continue to weigh the prospects for commodities demand as global growth slows against near-term supply tightness in the crude market.

West Texas Intermediate slid below $84 a barrel. Since late September prices have been bouncing in a range of about $17 as traders weigh interest rate hikes that menace economic expansion against planned output cuts from the Organization of Petroleum Exporting Countries and its allies.

In recent days oil volatility has slumped as prices have struggled for direction. For the global Brent benchmark a gauge of implied volatility fell to its lowest level since the middle of August.

Crude has remained heavily influenced by broader market trends and shifts in the dollar in recent weeks as central banks embark on one of the most aggressive rate hike cycles in decades. Investors are weighing concerns about the impact of a global economic slowdown and tighter monetary policy against the scope for a reduction in supply. JPMorgan Chief Executive Officer Jamie Dimon said at a conference that he is currently more worried about geopolitical tensions than the severity of a forthcoming recession, however.

“Souring investor sentiment, which is reflected in softer outright price levels, is the function of recession concerns, rising borrowing costs and a strong dollar,” said Tamas Varga, an analyst at PVM Oil Associates.

“The argument that recession fears and demand destruction will be the dominant driving force in coming months might look valid but unless these concerns are confirmed by conspicuously weakening structure any downside price potential will likely remain restrained,” he added.

Prices:

  • WTI for December delivery slid 1.2% to $83.61 a barrel at 10:08 a.m. in London.
  • Brent for December settlement fell 1.2% to $92.17 a barrel.
  • One pillar of support for the market despite a sharp drop since earlier in the year has been the structure of the futures curve. Brent futures are in a backwardation of about $2, indicating tight supply, while the US gasoline market’s structure also firmed markedly.

Speaking at a conference in Singapore, Fatih Birol, executive director of the International Energy Agency, said the OPEC+ supply cut was unfortunate, especially as several economies are now on brink of recession. Birol also said that while IEA members have the stockpiles available to conduct another round of strategic reserve releases, that’s not currently on the agenda.

© 2022 Bloomberg



Source link

Subscribe

- Never miss a story with notifications

- Gain full access to our premium content

- Browse free from up to 5 devices at once

Latest stories

spot_img

LEAVE A REPLY

Please enter your comment!
Please enter your name here