- Oil prices continued to decline on Friday, with WTI falling below $69 and Brent below $73.50.
- Concerns of a global economic slowdown are weighing on oil prices, particularly after Jerome Powell suggested more interest rate hikes were coming.
- Despite concerns of an economic slowdown, fuel demand in the U.S. is on the rise while some analysts remain optimistic about Chinese demand growth.
By Irina Slav
Crude oil prices extended a slide that began earlier this week as fears of a global slowdown prevailed oversupply constraint considerations.
Remarks from the Federal Reserve’s chairman Jerome Powell added to pressure on benchmarks. Powell said this week that he sees at least two more rate hikes by the end of the year.
The statement suggests current efforts to rein in inflation have not done the job, which in turn suggests that the situation is graver than many believed originally, including Powell himself.
Bullish factors remain in the game, however, likely limiting oil’s losses.
“The oil market remains torn between supportive fundamentals and an uncertain macro outlook,” Warren Patterson, head of commodities strategy at ING, told Bloomberg.
Patterson added that further rate hikes will weigh on prices in the immediate term but over the second half of the year there is space for prices to rise.
On the other hand, “Recession fears mount again following central banks’ rate hikes and a hawkish Fed,” CMC Market analyst Tina Teng told Reuters.
Traders will now be watching the next monthly PMI releases for major economies, due later today, Reuters noted.
Meanwhile, not everyone is so pessimistic about the global economy and the U.S. economy specifically.
“We are increasingly doubtful that we will see a recession in the U.S.,” Ole Hansen, commodities strategy chief at Danish Saxo Bank, told Bloomberg in an interview. “China simply cannot afford not to do additional stimulus measures, so we’re still looking for demand to recover in the second half,” Hansen explained.
It is worth noting that China’s oil demand has been on the rise so far this year despite mixed signals coming from its monthly PMI readings and other economic indicators.
In the U.S., demand for fuels has reached the highest since December and jet fuel demand has risen to the highest since this time last year, which is also good news for oil markets.
NB: Irina Slav wrote this article for Oilprice.com
