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On Thursday, Brent crude futures continued their downward trend for a third session and fell under $100 a barrel as worries about the demand for oil were stoked by potential global recession fears.
After falling to a session low of $98.50 earlier, the price of Brent crude futures dropped by 94 cents, or 0.9%, to $99.75 a barrel. WTI crude futures decreased by 79 cents or 0.8% to $97.74 a barrel.
On Wednesday, both benchmarks reached their lowest closing price since April 11. The decreases come after a sharp drop on Tuesday despite low supply elsewhere. The decline of $10.73 was the third-largest for the contract since it began trading in 1988 as WTI fell by 8% and Brent fell by 9%.
With little new information on output or consumption, Stephen Innes, managing partner of SPI Asset Management, stated that “oil is getting decimated.””
“The recessionary headline risk is still like an anvil around the neck of the market because commodity traders are becoming extremely risk-averse as a result of rising demand and ongoing concerns about (US) Fed policies.”
As central banks around the world increased interest rates to combat inflation, fears of a recession that could reduce demand for commodities led to a decline in oil prices along with other commodities like metals and palm oil.
The head of ING’s commodity research, Warren Patterson, stated that it appears as though the market is beginning to price in a recession.
But he went on to say that it’s difficult to be unduly pessimistic about oil prices because the Brent monthly spreads continue to show constrained supplies by remaining in large backwardation. In a backwardated market, prompt prices are greater than those in upcoming months.
Traders are keeping an eye out for any potential disruptions to the oil supply at the Caspian Pipeline Consortium (CPC), which has been ordered by a Russian court to halt operations for 30 days. As of Wednesday morning, exports at CPC, which manages 1% of the world’s oil supplies, were still going strong.
Investors also expected US government data that is scheduled for release on Thursday and would provide insight into the situation with domestic oil and fuel stockpiles.
According to market sources, industry data released on Wednesday showed that US oil stockpiles increased by around 3.8 million barrels last week. While distillate stocks decreased by roughly 635,000 barrels, gasoline inventories decreased by 1.8 million barrels.
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