Oil unscrews, the market fears a recession

Oil prices ended sharply lower on Tuesday, at their lowest in four months, operators still concerned regarding a possible recession following monetary tightening, which is creating the first turbulence in the United States in the banking sector.

The price of a barrel of Brent from the North Sea for delivery in May fell 4.11%, to close at 77.45 dollars. The barrel of American West Texas Intermediate (WTI), with maturity in April, dropped 4.63% to 71.33 dollars.

In post-close electronic trading, the market’s two benchmark varieties even continued their slide, with Brent falling below $77 and WTI below $71 for the first time since early December.

Investor confidence hit

“This banking crisis reinforces the fear of a recession”, commented John Kilduff, of Again Capital, in reference to the bankruptcy of three American establishments in a few days.

Despite a form of stabilization on Wall Street on Tuesday and the emergency measures taken on Sunday by the American authorities to guarantee deposits, “this affects investor confidence” in the financial system and “in the economy in general.” “And that doesn’t bode well for oil demand,” insists the analyst.

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“Apart from gold, the entire commodities sector seems to think we’re headed for a recession,” added Bill O’Grady of Confluence Investment. “And most traditional indicators announce it,” insisted the analyst, mentioning in particular the evolution of bond rates, which have been higher in the short term than in the long term for months, a phenomenon which almost systematically precedes a recession. .

Hypothesis of OPEC intervention

For Bill O’Grady, the market had so far clung to the prospect of a recovery in Chinese demand, to the point of relativizing the short-term fundamentals, namely abundant supply and weak American or even European consumption. , refined products. This had led the courses to evolve, since the beginning of the year, within tight margins.

“It looks like we’ve gotten out” of this range, and “when you cross a technical threshold (on the downside), it often triggers additional selling” and accelerates the fall, which happened at the end of the session on Tuesday . RBC analyst Helima Croft on Tuesday raised the possibility of intervention by the Organization of the Petroleum Exporting Countries (OPEC) if prices continued to fall. According to her, the meeting of the ministerial committee (JMMC), on April 3, “offers the opportunity for a change of trajectory”.

Saudi Arabia line disputed

“Reducing production has always been a difficult exercise for them,” argues John Kilduff, who recalls that the cartel’s production increased by 150,000 barrels per day in February compared to January, contradicting the group’s commitments, according to the Archyde.com agency.

For the analyst, OPEC is currently animated by centrifugal forces, several members, in particular the United Arab Emirates, disagreeing with the line dictated by Saudi Arabia, which pushed the alliance to announce, at the beginning of October, a cut in its production of two million barrels per day to support prices.

The cartel updated its forecast for 2023 on Tuesday and maintained its estimate of an increase in demand of 2.3 million barrels per day. It revised Asian demand upwards, supported by China, but lowered that of America and Europe.

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