Oil futures: Brent slumps 7% on demand slowdown fears
Quantum Commodity Intelligence - Crude oil futures were sharply lower as fears over an economic slowdown collide with tight supply/demand fundamentals, with demand fears the driving factor for Tuesday.
Front-month September ICE Brent futures were trading at $99.61/barrel (1825 GMT), compared to an intraday low of $99.47/b and Monday's settle of $107.10/b. Prices had ended Monday little changed after rebounding by around $3.50/b from session lows.
At the same time, August NYMEX WTI was trading $99.97/b, versus Monday's settle of $104.09/b, a fall of nearly 8% on the day.
"What we see is economic growth is proving quite resilient this year, still one can expect some downwards revision and even more so for the next year because of many uncertainties and risks," Valdis Dombrovskis, executive vice president at the European Commission, told reporters Monday,
"Unfortunately, inflation continues to surprise on the upside, so it's once again going to be revised upwards," he added.
Renewed outbreaks of COVID-19 in China also weighed on sentiment, while a stronger USD dampened investor appetite.
However, physical oil markets remain finely balanced, with OPEC urged to step up production by White House National Security Advisor Jake Sullivan in comments ahead of this week's visit by President Biden to Saudi Arabia.
"We will convey our general view…that we believe that there needs to be adequate supply in the global market to protect the global economy and to protect the American consumer at the pump," said Sullivan.
Meanwhile, IEA chief Fatih Birol said on Tuesday the G7 proposal to impose a price cap on Russian oil should include refined products as well, while also warning the energy crisis is set to continue.
"The world has never witnessed such a major energy crisis in terms of its depth and its complexity," Birol said Tuesday at a global energy forum in Sydney. "We might not have seen the worst of it yet, this is affecting the entire world."
Natural gas/LNG in Europe and Asia continue to trade at elevated levels amid ongoing supply concerns, while disruptions to Australian coal exports lifted benchmark prices to four-month highs.
"Growing fears of a recession and continued sluggish demand in China are pulling oil prices lower, though the current supply-demand balances remain precarious," said consultancy Eurasia Group.
