2023-05-02 15:54:55
Around 5:45 p.m., Brent fell 4.39% to $75.82 and WTI tumbled 4.57% to $72.20.
Oil prices widened their losses on Tuesday as worries regarding a possible global recession continued to weigh on crude demand ahead of the Fed’s monetary policy decision.
Around 3:45 p.m. GMT (5:45 p.m. CET), a barrel of Brent from the North Sea for delivery in July, lost 4.39%, to 75.82 dollars.
Its American equivalent, a barrel of West Texas Intermediate (WTI), for delivery in June, dropped 4.57% to 72.20 dollars.
The two crude benchmarks were thus moving to their lowest levels since the end of March.
“Recession fears are the main factor currently dictating the direction of crude oil prices,” said Stephen Innes of SPI AM.
The market “is also questioning China’s ability to drive economic growth and oil prices,” said Rystad Energy analyst Louise Dickson, noting that “uncertainty hangs over the pace of demand recovery. Chinese”.
Growth in factory activity in China weakened in April, official data showed on Sunday, due to weaker international demand and a labored post-Covid recovery.
The Purchasing Managers’ Activity Index (PMI), a reflection of the health of the industrial world, has indeed contracted.
“These figures have caused concern among investors, as they have had an impact on the growth prospects of the world’s second largest economy and on the global demand outlook,” explains Ricardo Evangelista, of ActivTrades.
Added to this is “the rise of bearish sentiment in the market”, underlines the analyst, “which has been fueled by the turbulence in the American banking sector and the imminence of an increase in interest rates by the Federal Reserve” (Fed).
The market is thus awaiting the Fed’s monetary policy decision on Wednesday but also that of the European Central Bank (ECB) on Thursday.
A tighter monetary policy might weigh on the economy by increasing the cost of credit for households and businesses. What accentuate the risks of recession, and therefore of a drop in demand for oil.
For Louise Dickson, the slowdown in the American economy is also a “potential harbinger (…) that the rise in borrowing costs and prices might slow down economic growth”.
“Gross domestic product (GDP) growth and oil demand are strongly correlated,” she explains.
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