Economy · June 22, 2022

Oil prices plummet by more than 5% due to recession fears

(Photo by JOE RAEDLE / GETTY IMAGES NORTH AMERICA / Getty Images via AFP)

HONG KONG, June 22, 2022 (AFP) Oil prices plunged more than five percent on Wednesday as traders are increasingly concerned that demand for the commodity will take a hit from a possible recession caused by a sharp rise in interest rates aimed at curbing inflation.

West Texas Intermediate lost 5.6% to $ 103.31 a barrel, while Brent fell 5.2% to $ 108.62.

Crude oil has skyrocketed in recent months to multi-year highs due to fears that the scarce supplies caused by the war in Ukraine will not be enough to meet the demand resulting from the reopening of world economies, especially China emerging from months of lockdown.

But central banks have been forced to raise financing costs as rising energy costs have helped push inflation to levels not seen since the 1980s. This has fueled concerns that economies around the world are heading into a recession, sending chills through the crude markets.

All eyes are on a two-day Congressional testimony from Federal Reserve Chief Jerome Powell this week, which will be scrutinized for an idea on officials’ plans to fight runaway prices.

However, Goldman Sachs said it still sees black gold prices resume their upward march.

“With demand for commodities above supply, markets remain tight even as growth rates slow,” a statement read.

“Investors should remember that the Fed-induced slowdowns are merely a short-term abatement of the symptom, inflation, and not a cure for the problem, underinvestment.”

dan / mtp

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