By Barani Krishnan
Investing.com -- The back-and-forth recession story in oil made a stunning lurch forward on Tuesday as crude tumbled as much as $10 a barrel, whipping bulls just settling in from post-holiday languor.
The dollar’s jump to two-decade highs on expectations of aggressive Fed rate hikes though also incentivized selling in oil, which tends to attract less buying from non-U.S. entities when the value of the greenback surges.
New York-traded West Texas Intermediate , or WTI, was down $9.31, or 8.6%, to $99.12 per barrel by 12:45 PM ET (16:45 GMT). The U.S. crude benchmark had finished June down more than 7%.
London-traded Brent crude, the global benchmark for oil, was the bigger loser on the day, falling a mouth-gaping $10.60, or 9.3%, to $102.90. Brent fell nearly 6% last month.
“We’ve been warning longs in the market for a while not to get too cushy with $120 oil with all these recession talks going around,” said John Kilduff, partner at New York energy hedge fund Again Capital. “Today is proof that the recession story is only going to go forth, and with stunning velocity. Of course, there’ll be pullbacks in the narrative from time to time. So, welcome to a new era of volatility as well.”
Deepening worries about a recession could weigh on the demand outlook for oil this week despite tight supply concerns and prospects of US job gains in June that could send crude prices into a new bout of volatility.
The drone of recession talk is expected to get louder across the United States after the Atlanta Federal Reserve’s forecast of a second straight quarter of economic decline for the year.
Wednesday’s minutes from the US central bank’s June meeting will give investors some insight into how policymakers see the future path of interest rates as markets remain focused on the prospect of a recession.
Theto push ahead with another 75 basis point rate hike at its upcoming July meeting, but the path for September is less clear.
Economists say the United States may be witnessing the beginnings of a real economic shakedown, only that it’s been too numb to notice because of the miraculous resilience of its consumers insulated by two years of pandemic aid money; a housing market still running on old stimulus energy; and stock markets often coming back after a few days of selloffs.
But U.S. consumers won’t be superheroes forever and the slide into the economic abyss could come faster than thought, warn analysts.
In oil markets especially, the prospect of a recession has created more two-way price action in recent weeks, preventing any unsustainable surges in the price of crude even as China reopened from COVID shutdowns and an oil workers’ strike in Norway loomed.
Add Chart to Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
- Enrich the conversation
- Stay focused and on track. Only post material that’s relevant to the topic being discussed.
- Be respectful. Even negative opinions can be framed positively and diplomatically.
- Use standard writing style. Include punctuation and upper and lower cases.
- NOTE: Spam and/or promotional messages and links within a comment will be removed
- Avoid profanity, slander or personal attacks directed at an author or another user.
- Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
- Only English comments will be allowed.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.