Oil Declines As Global Slowdown Fears Cut Into OPEC-Driven Gains
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(Bloomberg) -- Oil slumped with fears of a global economic slowdown dominating market sentiment even with tighter crude supplies in the offing.
West Texas Intermediate traded near $90 a barrel, paring losses after earlier falling as much as 3% to around $88. Oil futures moved in tandem with the broader market, where risk-off sentiment sent equities to their lowest since November 2020. Prominent Wall Street figures, including JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, said the US and global economies are likely to sink into recession next year. The International Monetary Fund and World Bank also saw rising risks of a slowdown.
“The lack of risk appetite and technical moves look to be responsible for driving crude lower after a few very bullish sessions in the aftermath of the OPEC+ quota cut announcement,” said Bart Melek, head of commodity strategy at TD Securities.
Oil fell last month to its lowest since January as slowdown concerns gathered force, rallying after the Organization of Petroleum Exporting Countries and its allies responded by reducing output. Investors are weighing how higher interest rates intended to fight inflation will impact demand against supply disruptions caused by the war in Ukraine heading into the northern hemisphere’s winter.
Further clouding the demand outlook, in China, the world’s largest crude importer, authorities are signaling that there’ll be no let up in the nation’s Covid Zero policy. The approach is sustainable and the country must stick to it as it is key to stabilizing the economy and protecting lives, the Communist Party’s flagship newspaper said in a commentary Tuesday.
European Union sanctions on Russia, which are set to take effect Dec. 5, are also beginning to affect trading because of the time lag between purchasing a cargo and getting it to its destination.
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