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Oil Loss Deepens as U.S. Recession Fears Grow; Weekly Data Delayed

Commodities Jun 23, 2022 03:47PM ET
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By Barani Krishnan

Investing.com -- Fed Chair Jerome Powell reiterates the central bank has no intent to crash the U.S. economy. But the rate hikes it’s threatening investors with aren’t giving any comfort to the oil market, which deepened its losses on Friday to settle below $105 a barrel on recession fears.

Adding to the cautious mood of investors was the surprise delay in the weekly U.S. oil inventory report, which Bloomberg said was held up by “power issues” and unlikely to see publication until next week. 

New York-traded West Texas Intermediate, the benchmark for U.S. crude, settled Thursday’s trade down $1.92, or 1.8%, at $104.27 per barrel.

London-traded Brent crude, the global benchmark for oil, settled down $1.69, or 1.5%, at $110.05.

“Crude prices may remain heavy until Wall Street is done fully pricing in an economic slowdown that will bring this economy on the verge of a recession,” said Ed Moya, analyst at online trading platform OANDA.

Powell reiterated on the second day of his biannual testimony to the U.S. Senate that the Fed had no intention of deliberately slowing the economy to bring down inflation raging at over 8% a year — more than four times its target.

Yet, the central bank would be reluctant to shift from raising rates to cutting them until it saw clear evidence that inflation was coming down in a convincing fashion, Powell said.

“We can’t fail on this. We really have to get inflation down,” Powell said. “We’re going to want to see evidence that it really is coming down before we declare ‘mission accomplished.'”

The Fed announced last week its stiffest US rate hike in 28 years to fight inflation, adding a three-quarter point that brought key lending rates to as high as 1.75% from May’s peak of 1%. 

That hike came after US inflation, as indicated by the Consumer Price Index, grew at an annualized rate of 8.6% in May — more than four times the Fed’s target. 

The Fed’s preferred rate of inflation is a mere 2% a year and it has vowed to raise rates as high and long as necessary to bring price growth back to its annual target.

Economists, however, fear that the central bank will push the US economy into a recession with its rate hikes.

The economy experienced a negative growth of 1.4% for the first quarter. If it does not return to positive growth by the second quarter, it will technically be in a recession, given that it takes just two straight quarters of negative growth to make a recession.

As for the weekly oil inventory data, as of Wednesday analysts tracked by Investing.com expected the EIA to report a crude stockpile drop of 569,000 barrels, versus the 1.96-million barrel rise reported during the week to June 10.

On the gasoline inventory front, the consensus is for a draw of 452,000 barrels over the 710,000-barrel decline in the previous week.

With distillate stockpiles, the expectation is for a climb of 328,000 barrels versus the prior week’s gain of 725,000.

Oil Loss Deepens as U.S. Recession Fears Grow; Weekly Data Delayed
 

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Comments (3)
Andy Prud
Andy Prud Jun 23, 2022 8:18PM ET
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Well they will see evidence of inflation coming down soon based on employment and housing retraction.. But not the prices in the store. And fed will stop hiking at that point declaring a victory on the matrix board
Alpha Omega
Alpha Omega Jun 23, 2022 5:52PM ET
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Powell never took any notes. He was almost detached. He answered like a zombie. His boss Janet Yellen had him schooled to be as unforthcoming as possible.and he looked tired.  But Y did he say that he waits for inflation to go back to 2%? Never.
Barani Krishnan
Barani Krishnan Jun 23, 2022 5:52PM ET
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I don't think any Fed chief I've seen testifying before Congress has taken notes in my 20+ years of seeing them on the podium. They just speak from experience. The Fed was certainly late to the QT game but there were also several open Covid programs as of late last year that they did not want to dilute with their rate tightening; hence the problem we have today. I don't think there was a blueprint of any kind to deal with the fears of the pandemic -- 2008/09 seems like a walk in the park to this -- thus the risk always that they were going to overdo what they did. I'm not blaming Trump's fiscal responses to the pandemic and neither am I blaming Biden's. It is what it is.
Brian Brick
Brian Brick Jun 23, 2022 5:52PM ET
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Barani Krishnan the last stimulus seems to be the Achilles heal.
Alpha Omega
Alpha Omega Jun 23, 2022 5:27PM ET
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Imo Powell was incorrect to assess that the Federal debt of 31 trillion was not a major concern yet....He also said YES to forthcoming rises in interest rates He almost said it without any reservations....as if he was saying to foreign money launderers,, like bring your money to America, we have plenty of dollars for sale.Y?.. America loses over a Trillion dollars in it's trade deals with the rest of the world and needs the world as the dollars' collateral. To keep the dollar above 58% of the global reserve currency.. Otherwise ... Venezuela and Zimbabwe... here...we come.
 
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