Crude oil prices extended a slide that began earlier this week as fears of a global slowdown prevailed oversupply constraint considerations.
Remarks from the Federal Reserve's chairman Jerome Powell added to pressure on benchmarks. Powell said this week that he sees at least two more rate hikes by the end of the year.
The statement suggests current efforts to rein in inflation have not done the job, which in turn suggests that the situation is graver than many believed originally, including Powell himself.
Bullish factors remain in the game, however, likely limiting oil's losses.
"The oil market remains torn between supportive fundamentals and an uncertain macro outlook," Warren Patterson, head of commodities strategy at ING, told Bloomberg.
Patterson added that further rate hikes will weigh on prices in the immediate term but over the second half of the year there is space for prices to rise.
On the other hand, "Recession fears mount again following central banks' rate hikes and a hawkish Fed," CMC Market analyst Tina Teng told Reuters.
Traders will now be watching the next monthly PMI releases for major economies, due later today, Reuters noted.
Meanwhile, not everyone is so pessimistic about the global economy and the U.S. economy specifically.
"We are increasingly doubtful that we will see a recession in the U.S.," Ole Hansen, commodities strategy chief at Danish Saxo Bank, told Bloomberg in an interview. "China simply cannot afford not to do additional stimulus measures, so we're still looking for demand to recover in the second half," Hansen explained.
It is worth noting that China's oil demand has been on the rise so far this year despite mixed signals coming from its monthly PMI readings and other economic indicators.
In the U.S., demand for fuels has reached the highest since December and jet fuel demand has risen to the highest since this time last year, which is also good news for oil markets.
By Irina Slav for Oilprice.com
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
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Comments
The global economy is made of two halves. The Asia-Pacific region led by China is vibrant, booming and growing fast with negligible inflation. The other half mainly the United States which is experiencing anaemic growth and also facing banking difficulties and the EU which is contracting and burdened by high inflation.
The prospect of more interest rate hikes by the US Federal Reserve adds to fears of one or two more US commercial banks collapses triggering a global banking or financial crisis reminiscent of the 2008 subprime financial crisis.
That is the very factor behind the weakness of oil prices over the last four months despite Western disinformation’s futile attempts to shift the blame on so-called slowdown in China’s economy.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert
It's Friday with no one wanting to be long going into the US market Monday for *ANY* commodity play makes all too much sense going on all Year 2023.