Oil bears are back as oil merchants sell oil again as concern for the course of the global economy deepens, carrying the advantage over the fears of the supply.
Brent Crude has lost more than $ 20 per barrel during the last month, with western Texas Intermediate in almost $25 per barrel. The fears of recession seem to be the main driver of the decrease in price, and demand remains solid despite prices.
Meanwhile, hedging funds sell their oil, John Kemp reported in his weekly column about the oil market movement. In the week to July 5, they sell equivalent to 110 million barrels of crude oil and fuel in the six most traded contracts.
This has brought the total volume sold in all of this contract to be a little more than 200 million barrels over the past four weeks, said Kemp. Acceleration in sales for a week to July 5 has become more famous in a total context of four weeks.
The forecasts of a recession in the United States, are increasing. The last of this week came from TD Securities, which said that the probabilities that the US would fall into a recession at the beginning of 2023 exceed 50 percent. Oil bears are back over these forecasts.
The head of the global strategy, Richard Kelly, listed three factors that would determine the course of the US economy. Downward: gasoline prices, Fed’s policy, since it seeks to stop inflation, and economic growth generally slowed down.
Conversely, the supply seems to be getting tougher. Libya last week stated the Majeure power about oil exports. The actual reserve oil production capacity from Saudi Arabia has become the talk of the town, but not in a good way: many open the kingdom’s ability to increase production in a meaningful way, namely, the way that will lead to global lower prices.
Russia continues to direct European oil exports to other buyers while the west claims how to apply the price limit designed to keep Russian oil flowing to the international market while reducing state revenue from commodities.
But the oil bears have just received a fresh push from China, which this week reported to identify the first case of the new and highly transmitted COVID-19 variant, which is expected to lead to mass testing and the possibility of limiting the movement based on the country’s zero-COVID in the country.
“The oil market is taking two directions with the extremely adjusted physical foundations established against demand concerns and the signs of the destruction of the price induced demand,” EBW analysis researchers said this week.
Up Till now, it seems that concerns over COVID lockdowns in China have caused the decrease in demand.
Even if Joe Biden reaches an agreement with Riyadh to increase production, there will be still doubts about whether it will be possible or not. These doubts are pushing the prices down.