As recession fears rise, crude oil prices stumble

13 Oct 2022 , 08:36 AM

After the market was weakened in the previous day by a deteriorating picture of global demand, oil prices struggled to regain their footing in early Asian trade on Thursday.

U.S. crude futures (WTI) were down 7 cents to trade at $87.20 per barrel, while Brent crude futures were down one cent to $92.44 per barrel.

The U.S. Energy Department and OPEC both reduced their demand projections.

OPEC reduced its forecast for demand growth this year by between 460,000 bpd and 2.64 million bpd on Wednesday, citing strong inflation and China’s COVID-19 containment measures’ revival.

The U.S. Energy Department revised its projections for both domestic and international production and demand. In 2023, it now predicts only a 0.9% growth in U.S. consumption, down from an earlier prediction of a 1.7% increase. The department’s revised 2% growth prediction for global consumption is now just 1.5%.

Last week, OPEC and its allies, including Russia, agreed to restrict supply by 2 million barrels per day (bpd), which caused prices to rise.

Inventory build-up is a result of worsening crude oil demand. According to news reports quoting API data, U.S. crude oil stocks increased by around 7.1 million barrels for the week ending October 7.

The dollar has made significant gains recently, notably against low-yielding currencies like the yen. This has put pressure on the energy market. The Federal Reserve’s determination to maintain raising interest rates to combat excessive inflation has increased yields, which has increased the value of the US dollar in the eyes of overseas investors.

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