Global recession fears keep crude values subdued

Front-month ICE Brent down by $0.54/bbl on the day from Friday, to $90.30/bbl at 09.00 GMT.

PHOTO: Oil markets sombre amid concerns that inflation will reduce demand. Getty Images

The market has doubts about whether the Russia oil price cap plan will proceed as planned and whether coalition will support it, oil market analyst Vandana Hari of Vanda Insights tells Engine. She opines that there are too many dots to be connected before the market can gauge any impact on Russian oil flows.

Upward pressure:

According to Reuters reports, Saudi Arabia and Russia see $100/bbl as a fair price that the global economy can absorb. Senior OPEC+ source tells Reuters that the focus remains on looking at supply and demand balance over the next year-and-a-half.

Iran's President Ebraham Raisi has asked US to guarantee that it would not withdraw from the nuclear deal, calling the American sanctions "tyrannical" in an interview with CBS. Meanwhile, EU foreign policy chief Josep Borrel expects a stalemate between US and Iran negotiations.

Downward pressure:

This week's central bank monetary policies, including those of the FOMC and Bank of Japan, will keep investors on the edge. The street expects FOMC to maintain its hawkish stance while raising key interest rates by 75-100 basis points.

The World Bank last week warned that aggressive policy tightening could cause a recession next year. World Bank Group President David Malpass has expressed concern that the trend will continue with ever-lasting consequences, adding that "growth is likely to slow further as more countries go into recession."

Hari of Vanda Insights notes that crude prices are currently under pressure due to growing pessimism about the global economy, consumer sentiment, and oil demand outlook.

International Energy Agency (IEA) has projected first decline in Chinese oil demand since 1990. In the face of Covid lockdowns and property crisis, the energy watchdog has predicted a decline of 420,000 b/d in Chinese oil demand this year.

By Konica Bhatt

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