Market Close: July 15 Down
Jul 14th, 2022 by loren
Oil continued its decline as record US inflation and disappointing earnings from Wall Street intensified fears of a recession.
West Texas Intermediate settled below $96 a barrel on Thursday. Earlier, futures breached $91 a barrel, hitting the lowest level since late February when crude began its ascent into triple digits. Broader markets recovered from the day’s lows after Federal Reserve officials clamed traders expecting an even more aggressive pace of rate hikes after a hotter-than-expected monthly inflation report. Oil futures have been in decline since early June on escalating fears the US may be pushed into a recession.
Nonetheless, global oil supply remains strained, as can be seen in timespreads showing a wide premium for immediately available barrels. Goldman Sachs Group Inc. said the market is “screaming” tightness and that this week’s selloff has been driven by low liquidity and technical factors. “Oil has been the last major risk asset to start falling, as the supply was previously very tight,” said Fawad Razaqzada, market analyst at City Index. “The supply is not plentiful yet, but concerns that demand is going to weaken is what is driving prices right now.”
President Joe Biden landed in the Middle East on Wednesday just as a report showed US inflation soared to a four-decade high last month, much of it driven by energy costs.
There are signs that high US gasoline prices are starting to take their toll on consumption. US gasoline demand fell to the lowest level for this time of year since 1996, even slipping below the same week in 2020, according to the Energy Information Administration. The four-week rolling average of gasoline demand was the second-lowest on a seasonal basis since 2000. Meanwhile, crude stockpiles rose by 3.25 million barrels.
Renewed Covid-19 outbreaks in China have also weighed on the outlook for oil demand. Shanghai’s flareup appears to be easing, but other regions are being locked down and facing restrictions to curb the spread of the virus. Nationwide, 292 cases were recorded on Wednesday.
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