By Julia FanzeresBloomberg Posted on July 12, 2022 July 12, 2022 Oil fell as worries about a global economic slowdown and rising Covid-19 cases in China reduced traders’ risk appetite. West Texas Intermediate fell more than 8% to settle below $96 a barrel for the first time since early April. Rising virus cases in China and looming U.S. inflation data are fueling concerns about demand. Meanwhile, declining liquidity also worsens price movements. Money managers have turned more bearish on the main oil benchmarks, reducing their net positions last week to the lowest level since 2020. “Volatility in commodity markets raises the stakes for putting money to work,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Management. “The decimation of other commodities also reduced risk appetite for crude even in a tight supply market.” Despite fears of a recession, several energy administrations agree that supply tightness is set to worsen. IOE executive director Fatih Birol said nations “may not have seen the worst” of a global energy crisis, while OPEC’s first look at 2023 showed no relief from market tightness. Underscoring supply constraints, the US cut its growth forecast for oil production through 2023, citing inflation and labor shortages. Crude has fallen since early June on escalating fears that the US could be headed into recession as central banks raise interest rates to fight inflation. However, physical markets continue to show signs of strength. Premiums for North Sea oil were at their highest level since at least 2008. The oil futures curve also remains inverted, where near-term contracts are more expensive than those for later delivery.
Prices
WTI for August delivery fell $8.25 to $95.84 a barrel in New York. Brent for September settlement fell $7.61 to $99.49 a barrel.
President Joe Biden is scheduled to visit Saudi Arabia this week during a tour of the Middle East as he seeks to tame high energy prices that have roiled the global economy. The US believes OPEC has room to increase output if Biden’s upcoming visit to the region yields any deals. The French President will meet with the UAE leader next week to discuss oil supplies. –With help from Alex Longley.
