Crude oil prices rose, after dropping below US$100 per barrel yesterday for the first time in months, although gains were curbed by lingering concerns about a global recession.
Brent and US West Texas Intermediate (WTI) crude both posted their biggest daily decline yesterday since March as recessionary woes outweighed supply worries and as a stronger dollar made oil more expensive for some buyers.
“Crude oil prices have slumped as weakening demand concerns are starting to outweigh fears about tight supply,” said Fawad Razaqzada, a market analyst at City Index.
“A growing number of analysts are expecting that many of the world’s leading economies will suffer negative growth in the next few months, and this will drag the US into a recession.”
Razaqzada said he suspects that investors are selling everything, including crude and other stocks, amid fears of a looming global recession that could be prolonged.
“With all these concerns at the forefront of investors’ minds, crude oil prices are likely to be on a slippery slope for a while,” he added.
Analysts from Deutsche Bank said the market had been grappling with “near double-digit percentage drops in oil” over the past 24 hours, while analysts from Liberum also noted recessionary fears and said investors were turning to safer assets.
“It is increasingly hoped that lower oil prices, which would benefit both businesses as well as consumers, could lead to an adjustment of investment and spending patterns which would underpin a faltering economy,” said Richard Hunter, Head of Markets at interactive investor.
The markets showed modest signs of recovery today with Brent crude futures up around US104 a barrel and US WTI back above US$100.