Crude Oil Prices Decline Amid Mounting Concerns Over An Economic Slowdown And Rising Inflation

Oil Dips 4 Percent Between Looming Recession Fears

In the beginning of the week (week ending June 25, 2023), prices of crude oil began slipping and have declined further since all signs point towards a global economic slowdown. Furthermore, the worries were stressed further as there was an expectation of around two more interest rate hikes by the end of the current year.

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The attempts to control inflation have failed, which in turn hints that the situation is more severe than what was anticipated before.

The oil market is witnessing uncertainty due to the presence of some supportive factors but an overall uncertain macro-outlook.

It is expected that any more interest rate hikes will stress prices in the near term, but for the second half of the year, there is some hope for a price rise.

In contrast, the resurfacing of recession fears that were subdued earlier, along with the rise and interest rates and a hawkish Fed, are concerning for traders that are closely monitoring PMI releases each month for major economies.

Despite these worries, the US holds a positive market sentiment regarding the economy and doubts that there will be a recession in the country on the back of hopes that demand from China will recover by the second half.

A noteworthy observation is that China's demand for oil has been steadily increasing this year in spite of the mixed sentiment hinted at by the monthly PMI reading and other financial aspects.

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In the US, fuel demand has peaked since December, and demand for jet fuel has been the highest compared to the same time as the previous year, which also indicates a positive outlook for the oil market.

According to the Procurement Resource article, oil prices are continually declining as the worries over an economic slowdown and inflation peak. However, there are expectations of recovery as demand in the US and China seem bullish. For now, the near-term market outlook does not look appealing, but there are hopes of recovery.