Global Recession Threat, World Oil Prices Drop
NEW YORK, KOMPAS.COM World crude oil prices have decreased thin at the end of trading Monday (10/10/2022) local time (Tuesday WIB). Oil price moves overshadowed by investor worries of fuel demand and tighter supply, as a result of global recession.
Citing CNBC, Brent crude futures fell 69 cents, or 0.7 percent, to 97.23 US dollars per barrel. Meanwhile, West Texas Intermediate crude fell 36 cents, or 0.4 percent, to 92.57 US dollars per barrel.
The statement of the Central Bank of the United States has attracted the attention of investors. US Federal Reserve Chicago President Charles Evans said the Fed has a strong outlook on raising rates the benchmark interest rate, with a target of 4.5 percent since March 2022, and continue to maintain that increase.
The higher interest rates are aimed at give the US central bank time to evaluate the impact inflation and enabling a stifled crude supply chain at the moment.
Going forward the US economy will be more bleak, because they are not so believe that inflation can be controlled. So from the macro side, this weighed on the oil, said John Kilduff, partner at Again Capital LLC in New York.
Crude oil prices are also struggling amid the US dollar strengthening trend that continues to be mighty. With a stronger US dollar exchange rate will weigh on oil prices, because oil prices will be more expensive to countries with currencies other than the US dollar.
Meanwhile, the Organization of the Petroleum Exporting Countries and its allies or OPEC+ which decides to tighten supply will capped the decline in oil prices last week. However, there are signs that the Saudi Arabian oil lord, will continue to provide its full support to oil importers in Asia.
Saudi Aramco calls for at least seven customers in Asia to be confirmed will receive the full contract volume of crude oil in November 2022, towards the peak of winter. At last weeks meeting, OPEC+ decided to lower their production target by 2 million barrels per day.
After the OPEC+ announcement, Brent and WTI oil prices experienced biggest one-week gain since March 2022. However, production cuts The OPEC+ oil disappointed the US, which wanted it increase in production to support the countrys economy.
Concerns over oil demand are still looming, because the pandemic has reduced consumption. On the other hand, this matter is exacerbated with the efforts of the European Union which is a member of the G7 countries to imposed price limits on Russian oil exports.
Fitch Ratings ranks the complicated new sanctions of the G7 countries considered to be able to cause Russia to close its crude oil supply. These geopolitical factors can change supply patterns and cause greater price volatility
The prospect of a recessionary economy will lead to more oil demand low, and we expect price volatility to remain high in the short term due to geopolitical factors, such as more sanctions further leads to a reduction in Russian exports, writes Fitch Ratings.
Meanwhile, activity in China during September contracted for the first time in four months due to Covid-19 restrictions suppress business demand and confidence. Economic slowdown in China, which is the worlds second largest oil consumer, adding to concerns about a potential global recession triggered by the increase in interest rates by the Fed to cope with inflation.
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Source: https://money.kompas.com/read/2022/10/11/073800726/ancaman-resesi-global-harga-minyak-dunia-turun
