October 16, 2022 [Rigzone] – Oil slumped as fears of a global economic slowdown overshadow the threat of tighter crude supplies from OPEC and its partners.
West Texas Intermediate settled near $89 a barrel, further trimming gains that crude made last week in the wake of a decision by the Organization of Petroleum Exporting Countries and its allies to cut output. Prominent Wall Street figures, including JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, said the US and global economies are likely to sink into recession next year. The International Monetary Fund and World Bank also saw rising risks of a slowdown.
“The lack of risk appetite and technical moves look to be responsible for driving crude lower after a few very bullish sessions in the aftermath of the OPEC+ quota cut announcement,” said Bart Melek, head of commodity strategy at TD Securities.
Oil fell last month to its lowest since January as slowdown concerns gathered force, later rallying after the Organization of Petroleum Exporting Countries and its allies responded by reducing output. Investors are weighing how higher interest rates intended to fight inflation will impact demand against supply disruptions caused by the war in Ukraine heading into the northern hemisphere’s winter.
WTI for November delivery dropped $1.78 to settle at $89.35 a barrel.
Brent for December settlement fell $1.90 to $94.29 a barrel.
Further clouding the demand outlook, in China, the world’s largest crude importer, authorities are signaling that there’ll be no let up in the nation’s Covid Zero policy. The approach is sustainable and the country must stick to it as it is key to stabilizing the economy and protecting lives, the Communist Party’s flagship newspaper said in a commentary Tuesday.
European Union sanctions on Russia, which are set to take effect Dec. 5, are also beginning to affect trading because of the time lag between purchasing a cargo and getting it to its destination.