Recession fears fuel oil price dropย
- Oil market bearishย ย
- Prices reflect fears of a slowdown in China, the USA, and Europe.ย ย
- OPEC remains upbeat on global economic growthย ย
- The volatile oil market is good for tradersย ย
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The start of 2022 saw the price of oil surge beyond $120 a barrel, delivering oil companies their biggest profits in years.ย ย
By September 2022, however, fortunes have changed, and the oil price is facing a three-week decline.ย ย
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Down $30 a barrelย ย
Oil prices have declined by about $30 a barrel since a peak in early June. The decline reflects the US Federal Reserve and major central banks implementing aggressive interest rate hikes to combat high inflation.ย ย ย
The tightening monetary policy will slow economic growth and it’s expected that the US and Britain will enter a recession. All this translates to lower demand for global oil demand growth.ย ย ย
Growth despite recession fearsย ย
Interestingly, OPEC and the International Energy Agency (IEA), expect growth in global oil demand for the remainder of 2022 and beyond. OPEC has even said that demand could outpace pre-COVID levels in 2023.ย ย
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This is at odds with the current oil market experiencing bearish signals; Prices reflect fears of an economic slowdown in China, and a recession in Europe and the USA.ย ย ย
Despite superb employment figures, the US is experiencing the dual problem of runaway inflation and high-interest rates. If it continues this path, an economic slowdown will lead to a recession.ย ย ย
The EU and the UK are expected to enter recession later this year, reports Fitch Ratings. Global economic growth is now expected at just 1.7% in 2023, a drop of 1%.ย ย ย
ย OPEC still upbeatย ย
OPEC remains upbeat on global economic growth, stating that demand for trade will continue. The organisation said that growth is set to remain at 3.1% in 2022 and another 3.1% next year, reports OPEC.ย ย ย
ย The organisation believes that a healthy demand will remain despite market fears of recession.ย ย ย
ย The IEA, however, cut its global oil demand growth estimate by 110,000 bpd to 2 million bpd for 2022.ย ย ย
ย Oil supply in the short term will be uncertain as demand remains volatile.ย ย ย
Traders can cash in on volatilityย ย
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Volatility might be bad for oil analysts but it’s a trader’s best friend; volatility creates opportunity. A change in the outlook for oil futures could create the same huge upswings we’ve seen at the start of 2022.ย ย
So, take advantage of the volatile oil industry today!ย ย ย
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