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Brent’s drop fuelled by recession fears

Brent oil is on course to register its first back-to-back weekly declines since April, and is currently testing support at its upward trendline since March.

If this selling persists for oil benchmarks next week, it will mark Brent’s first monthly decline of 2022.

Brent’s drop fuelled by recession fears

Oil futures have been unwinding some of their stellar year-to-date gains of late, as investors and traders fear that the wave of rate hikes around the world could ultimately trigger a recession.

Even Fed Chair Jerome Powell conceded this week that a US recession is a possibility, while stating that the Fed’s battle against red-hot inflation is “unconditional”.

Although fundamental forces still suggest that oil can stay elevated, prices could yet dip back even closer to the psychologically-important $100 mark as long as markets remain obsessed about recession risks.

Still, oil bulls can take heart from the tightening market structures amid ongoing supply disruptions and the backwardation in oil markets, despite narrowing year-to-date gains.

 

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