Breaking News
Investing Pro 0
Cyber Monday Extended SALE: Up to 60% OFF InvestingPro+ CLAIM OFFER

US Oil in Red for Second Week, First Since April on Recession Fears

Commodities Jun 24, 2022 01:50PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters.
 
LCO
+0.16%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
CL
+0.04%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Barani Krishnan

Investing.com -- U.S. crude prices fell for a second straight week despite a rebound on Friday, suggesting that recession fears could pose a greater challenge to oil bulls than thought despite typically busy summer travels that are good for the energy sector.

New York-traded West Texas Intermediate, the benchmark for U.S. crude, settled up $3.35, or 3.2%, at $107.62 per barrel.

London-traded Brent crude, the global benchmark for oil, was higher by $3.07, or 2.8%, at $113.12.

For the week though, WTI showed a 1.8% decline, following through with the previous week’s 9.2% tumble.

It was the first time since April that WTI had posted back-to-back weekly losses. Prior to this, it had rallied non-stop seven weeks in a row. 

Brent was flat on the week, ending exactly where it finished the previous Friday, after a prior weekly decline of 7.3%. 

To be sure, WTI remains up 47% on the year after six months of gains through May while Brent shows an annual rise of nearly 45%.

Despite that and the optimism over summer travel, oil had buckled in the past fortnight “under the weight of recession fears and positioning,” said Scott Shelton, energy futures broker at ICAP (LON:NXGN) in Durham, North Carolina. 

“I feel like oil should be much higher than this but then again, I … recognize that most of the bulls are struggling and quite frankly out of patience in many cases due to volatility and nearly a $20 drop in a very short period of time,” added Shelton.

Just two weeks ago, WTI hit three-month highs of above $123 a barrel while Brent scaled similar peaks breaching $125. 

Since then, the Federal Reserve, or Fed, has threatened to spoil the show for oil longs with the most draconian rate hike threats in a generation.

This month’s 75-basis point, or three-quarter point, rate increase is the central bank’s biggest in 28 years.

Some Fed bankers have advocated another 75-basis point hike for July. A more deterrent message against pricing pressures would be a 100-basis point, or full percentage point. 

A combination of 50, 75 and 100 basis point hikes over the remaining four rate revisions for this year could help expedite the Fed’s aim of bringing inflation now raging at 40-year highs of above 8% back to the central bank’s target of just 2% per year.

Economists, however, fear that the Fed will push the economy into a recession with its quantum of hikes. The economy contracted by 1.4% in the first quarter of the year and will technically slip into a recession if it does not return to positive growth by the end of the second quarter. 

U.S. consumer sentiment fell to a new record low in the latest reading of the University of Michigan’s closely-followed Consumer Sentiment index released on Friday. Consumer spending accounts for 70% of American gross domestic product, or GDP.

Despite all these, the American consumer has remained incredibly resilient in facing the worst inflation since the 1980s. US household consumption accounts for around 68% of aggregate expenditure even after gross domestic product declined 1.4% in the first quarter. This is the kind of strength, economists say, could help GDP tread water and avoid a recession in 2022.

Sales of new homes in the United States also jumped almost 11% in May from a month earlier, according to data on Friday from the Commerce Department that overshot economists’ forecasts and underlined the Fed’s difficulty in restraining demand in a sector contributing to runaway inflation.

On the oil front itself, gasoline stubbornly at around $5 a gallon hasn’t quite destroyed demand among U.S. drivers in the run-up to the country’s peak summer season for road trips.

It’s the same story with air travel despite higher ticket prices for fliers and costlier jet fuel for carriers.

American consumers spent $6.6 billion in February booking airline tickets during the spring break, according to data compiled by Adobe (NASDAQ:ADBE) Analytics. That was 6% higher than in February 2019, and up 18% from January of this year.

Through the first 15 days of May, spending by airlines rose 24% compared to 2019 while bookings were up only 3%. The gap between spending and bookings "highlights the effects of persistently high prices,” Adobe said. 

US Oil in Red for Second Week, First Since April on Recession Fears
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email