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Home Stock Market

Oil prices plummeted below $100 a barrel amid expectations of a recession and a slowing world economy

Tom Hagler by Tom Hagler
29.09.2022
in Stock Market
Oil prices plummeted below $100 a barrel amid expectations of a recession and a slowing world economy
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Oil prices dropped significantly on Wednesday, July 5. Amid fears of a global economic slowdown due to an impending recession, futures contracts for U.S. oil benchmark WTI (West Texas Intermediate) fell below $100 a barrel, losing more than 8%. The drop for North Sea Brent exceeded 9% and the price per barrel reached $103.

Oil Prices Divided Analysts

High commodity prices were the main reason for the sharp rise in inflation, which approached its highest level in 40 years. Citi analysts said Tuesday that Brent could fall to $65 during the course of this year if the economy does slip into recession.

Цены на нефть рухнули ниже $100 на фоне ожидания рецессии и замедления мировой экономикиThe oil market has taken a bit of a nosedive amid expectations of a recession. Photo: Yandex ”

In a recession scenario with rising unemployment, household and corporate bankruptcies, commodities would follow a falling cost curve, and now costs are falling and margins are turning negative,” credit analysts wrote in a note to clients

.

Recall that Citi has been one of the few oil bears while other financial firms such as Goldman Sachs have seen oil prices as high as $140 a barrel.

Inventories are at critically low levels at the moment, and a forced replenishment will keep demand on track, according to TD Securities. And Jeffrey Curry, head of commodity research at Goldman Sachs, added that right now “financial markets are trying to set their price, with the physical markets telling us something completely different.”

The decline in oil prices has weighed on energy stocks. UK giants BP and Shell suffered heavy losses on European exchanges, losing from 5% to 7% in the course of trading. The capitalization of French TotalEnergies decreased by 4.6%. ExxonMobil (XOM) shares (4.16%) and Chevron (CVX) (3.89%) were the main losers on NYSE. The lighter shares of ConocoPhillips (COP) and EOG Resources (EOG) dropped more than 7%.

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