Oil prices continue fall on growing recession fears
Oil prices were continuing their recent fall on Monday amid growing recession fears, particularly in China and the US.
The front-month contract for Brent crude North Sea oil was last seen down USD 1.06 at USD 95.06/bbl, while the WTI equivalent was USD 1.58 lower at USD 88.86/bbl.
Concerns regarding a “possible recession and economic downturn” had been weighing on crude prices since the beginning of last week, said analysts at Phillip Nova in a note, adding demand from China “looks severely dented”.
This comes after the IMF warned the global economy was facing “an increasingly gloomy and uncertain outlook” as the three biggest economies – US, China and the euro area – showed signs of stalling amid the fallout from the Ukraine war.
“Oil prices have surrendered their short-lived pullback… and have resumed their downside run as recession fears are escalating dramatically in the US economy,” said Sagar Dua at FXStreet in a note.
“Stubborn Russian oil output and weaker than expected demand growth mean the oil market is likely to remain in surplus for the remainder of this year and into early next year, which should limit the upside in oil prices,” he added.
Forecasts revised lower
In light of this, FXStreet lowered its forecasts for Brent crude for Q3 and Q4 from USD 118/bbl and USD 125/bbl to USD 100/bbl and USD 97/bbl, respectively.
Its full-year forecast for 2023 was down to USD 97/bbl, from USD USD 99/bbl.
Meanwhile, the market was “still awaiting further details on how Iranian nuclear talks are progressing”, said ING bank, with the US currently sanctioning Iran’s energy supplies due to its nascent nuclear programme.
“Reports suggest that the US had discussions with the UK, Germany and France over the weekend to go through the EU proposal for a nuclear deal.”
There was the potential for “in excess of 1m bbl/day of additional supply coming onto the market if we were to see a deal”, added the bank.
Published: 22-08-2022
