On Tuesday, oil prices fell for third straight session, as a slew of weak economic data from Germany, the Eurozone, and the United Kingdom impacted on the forecast for energy consumption. Brent crude prices slid $1.76, or 2%, to $88.07 per barrel, while West Texas Intermediate crude futures dropped $1.75, or 2.1%, to $83.74 per barrel. This month, Eurozone corporate activity figures took a surprising downward turn, indicating the region may be entering a recession.
German readings indicated that the country is in the midst of a recession. Businesses in the United Kingdom reported another monthly drop in activity, emphasizing recession fears ahead of the Bank of England’s interest rate announcement next week.
“There is definitely a conversation going on about the global economy being worse this week than last week,” Mizuho analyst Robert Yawger said. “It doesn’t help that many of the top bankers and financial experts are in Saudi Arabia today talking about how bad the economy is,” Yawger continued, referring to the Future Investment Initiative’s “Davos in the Desert” event.
In contrast to Europe, statistics from the United States indicated that corporate production increased in October, as manufacturing recovered from a five-month slump. Because of the relative strength of the US economy, the dollar rose, making dollar-denominated oil more costly for holders of other currencies.
“As much as this market has been concerned about the Middle East war and Saudi Arabia’s efforts to tighten supply, demand has been a major headwind for a long time,” said John Kilduff, partner at New York-based Again Capital.
The American Petroleum Institute’s weekly storage report, on the other hand, revealed significant drops in crude oil and gasoline stockpiles last week, reflecting robust demand in the country.
According to a preliminary Reuters survey conducted on Monday, experts predicted crude oil stockpiles to rise. The US Energy Information Administration will release official storage statistics on Wednesday at 10:30 a.m. EDT (1430 GMT).
Both benchmarks quickly regained some losses after the news in low volume, post-settlement trade, but were still down roughly 2% by 4:50 p.m. EDT.
Meanwhile, the release of captives from Gaza and increased diplomatic attempts to control the confrontation between Israel and Hamas have reduced the risk premium that helped push Brent prices to their highest in a month on Friday, according to Kilduff and others.
Also on Tuesday, the International Energy Agency stated that based on existing government policy, it anticipates fossil fuel demand to peak around 2030.
Please note that this article does not offer any instructions or suggestions regarding investment decisions. It is important for you to conduct your own research or seek professional advice from a qualified professional before conducting an investment decision.