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Oil Shows First Big Monthly Loss in 7 Months as Volatility Returns

Commodities Jun 30, 2022 02:59PM ET
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© Reuters.

By Barani Krishnan

Investing.com -- The oil rally may be nowhere near to over. But the astronomical month-after-month gains in crude prices have ended at least for now as recession worries led to double-digit losses in June for some longs in the game.

Crude prices were still poised to finish the second quarter up, with U.S. benchmark, the West Texas Intermediate ending with a 5% gain and global benchmark Brent up about 1%. But for June, they were deeply in the red, with Brent down more than 11% and WTI off by nearly 8%.

It was the first and biggest monthly drop since November’s loss of 16% for Brent and 20% for WTI.

In Thursday's trade, Brent’s most active contract, September, hovered at under $110 a barrel by 2:45 PM ET (18:45 GMT). That compared against last month’s close of $122.84 for Brent’s most-active month and $107.91 in March.

A barrel WTI for August delivery, meanwhile, settled at $105.76 — versus its close of $114.67 for May and $100.28 for March.

Thursday’s drop alone of nearly 4% weighed heavily on the two crude benchmarks as producer cartel OPEC+ and its allies confirmed a previously-agreed production of nearly 650,000 barrels per day for July and August — up more than 50% from June. 

The Saudi-led and Russia-supported alliance of 23 oil producers said the higher output will be necessary to meet the spike in crude demand projected for the next two months, which are expected to see inordinately high road and air travel from people making up for two years of relative summer time inactivity forced by the coronavirus pandemic.

But the fear of a potential recession appeared to loom larger than OPEC’s demand outlook.

“There's a strong likelihood of recession this year or next and investors are increasingly accepting that fate as well,” said Craig Erlam, analyst at online trading platform OANDA. “The prospect of a recession has created more two-way price action in recent weeks, preventing any unsustainable surges in the price of crude as China reopened and the OPEC+ deficit increased.”

An internal OPEC+ ​document, reported by newswires earlier this week, showed the alliance having trimmed its projected 2022 oil market surplus to 1 million barrels per day from a previous estimate of 1.4 million.

Oil Shows First Big Monthly Loss in 7 Months as Volatility Returns
 

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Comments (2)
SunilKumar Dixit
SunilKumarDixit Jun 30, 2022 1:35PM ET
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WTI is poised for a potentially bearish price reversal top which is a secondary top that further needs a monthly closing below $101 for immediate downside targets of $98-$95-$91 Currently Oil wants to park below 100 Day SMA $106.40
Barani Krishnan
Barani Krishnan Jun 30, 2022 1:35PM ET
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Thanks for that perspective, Sunil. OPEC being mum about September is a reflection of the uncertainty post-summer.
Francis Lim Wei
Francis Lim Wei Jun 30, 2022 12:15PM ET
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looking forward for it to drop to $50
Barani Krishnan
Barani Krishnan Jun 30, 2022 12:15PM ET
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that might be too wishful, sir :)
 
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