Oil prices fell sharply on Tuesday, in a market concerned about a possible generalized economic slowdown, or even a recession, which would reduce demand for black gold.
The price of a barrel of Brent from the North Sea for June delivery tumbled 5.22%, to close at $107.25, while the US West Texas Intermediate (WTI), with May maturity, lost also 5.22% to $102.56.
Operators were guided by the downward revision by the International Monetary Fund (IMF) of its global growth estimate for 2022, from 4.4% previously to 3.6%.
A slowdown linked, according to the Fund, to the consequences of the war in Ukraine and the sanctions imposed on Russia, which come at a time when most central banks are carrying out monetary tightening. This warning echoes the weakness of the Chinese economy, which is struggling to emerge from a new series of strict anti-Covid-19 confinements when it was already showing signs of running out of steam.
For Craig Erlam, an analyst at Oanda, the market offered itself a breather on Tuesday after four consecutive sessions of increases, which brought the price of a barrel to levels more frequented since the end of March.
In less than a week, Brent had risen by almost 15%.“The market has taken off” with this sharp ebb, according to Stephen Schork, analyst and author of the Schork Report, because “a fundamental imbalance remains” between supply and demand, the first less than the second, “without being treated”.
Calls to increase volumes
As China lifts its restrictions, “Headwinds will turn into upwinds as the (Chinese) authorities are in favor of more support for the economy”anticipates, in a note, Bart Melek, of TD Securities.
On the supply side, the Organization of the Petroleum Exporting Countries (OPEC) and its allies in the OPEC+ agreement produced around 1.45 million barrels per day below their target in March, according to a document mentioned by the Archyde.com agency. , which contributes to tensions in the market.
In the United States, Stephen Schork expects “a moderate response” calls to increase volumes “because the government is dumping its reserves on the market (…), which totally dissuades the industry from producing more”.
Medium term, “it is certain that we are heading towards a recession”announces the analyst, who recalls that the last six major economic reversals in the United States were preceded by a surge in energy prices.
“The seeds of recession are planted”he insists in reference to inflation which has reached its highest levels since the beginning of the 1980s, with, on the horizon, “a recession within twelve months”.