Oil extends losses as recession fears mount

TOKYO (REUTERS) – Oil prices continued to retreat on Thursday (June 23) as investors reassessed the risks of recession and the impact of interest rate hikes in major economies on fuel demand.

US West Texas Intermediate (WTI) crude futures fell US$1.69, or 1.6 per cent, to US$104.50 a barrel by 4pm Singapore time. Brent crude futures dropped US$1.60, or 1.4 per cent, to US$110.14.

Both benchmarks tumbled by as much as US$3 a barrel in early morning Asian trade, after plunging around 3 per cent in the previous session. They are at their lowest levels since mid-May.

Investors are continuing to assess how worried they need to be about central banks potentially pushing the world economy into recession as they attempt to curb inflation with interest rate increases.

“Oil markets remained under pressure as investors were concerned that US rate hikes would stall an economic recovery and dampen fuel demand,” said Mr Kazuhiko Saito, chief analyst at Fujitomi Securities Co.

“The US and European hedge funds have been selling off their positions ahead of the end of the second quarter, which is also cooling investor sentiment,” he said, predicting the WTI could fall below US$100 a barrel before the July 4 holiday in the United States.

US Federal Reserve chief Jerome Powell said on Wednesday that the central bank is not trying to engineer a recession to stop inflation but is fully committed to bringing prices under control even if doing so risks an economic downturn.

US President Joe Biden, meanwhile, called on Congress to pass a three-month suspension of the federal petrol tax to help combat record pump prices and provide temporary relief for American families this summer.

“The news temporarily boosted the oil product prices, but it was later viewed that even if the petrol tax was suspended, retail prices would remain high, making it difficult to stimulate demand,” Mr Saito said.

The US Energy Information Administration said its weekly oil data, which was scheduled for release on Thursday, will be delayed due to systems issues until at least next week.