Recession Fear Pushes US Oil Below $100; Inventory Data Expected by Investing.com

© Reuters.

By Barani Krishnan

Investing.com — For the second time in a fortnight, U.S. crude prices broke below the $100 a barrel support, even ending below that mark on Tuesday.

And again, oil bulls will likely rely on weekly US inventories data to restore the market upside.

Crude, the global oil benchmark traded in London, settled down $3.48, or 3.3%, at $102.46 a barrel, after an intraday low of $101.73.

After rallying 6% in the previous two weeks on speculation that Europe was closing in on a long-awaited ban on Russian oil, Brent had given up 9% since the start of the week on fears that states States did fall into recession following aggressive rate hikes. by the Federal Reserve to beat inflation, which is growing at its fastest pace in 40 years.

But it was US crude that was on the radar of the oil bears on Tuesday.

New York Trade, or WTI, the benchmark for U.S. crude, settled Tuesday’s trade down $3.33, or 3.2%, at $99.76.

WTI hit a session low of $98.91 earlier, its lowest since the April 26 low of $97.06.

The benchmark US crude index gained almost 8% in the previous two weeks of trading to concede almost 10% in the first two days of this week.

Tuesday’s drop in crude prices came as the American Automobile Association reported that the average gasoline price at U.S. pumps hit a record high of $4.37 a gallon.

Meanwhile, central bank officials at the Federal Reserve were debating the possibility of a 75 basis point rate hike at their June meeting, after instituting increases of 50 basis points and 25 basis points. basis at their meetings in May and March, respectively. It will be the biggest U.S. rate hikes in at least a generation as the Fed tries to fend off the fastest price hike since the 1980s.

Gasoline prices fell to $4.07 in April s $4.07 a gallon in April after the Biden administration announced the release of unprecedented volumes of crude oil from the U.S. Petroleum Strategic Reserve, or SPR, in an effort to reduce pressure on global supply increased by sanctions against Russia.

President Joe Biden authorized his first major withdrawal from the SPR in November as oil supplies began to tighten amid a rapid recovery in demand from the coronavirus crisis that sent crude and oil prices soaring. American fuel. Over the past two months, the administration has drawn an average of 3 million barrels from the SPR each week to help meet demand for crude from domestic refiners in a market experiencing overconsumption of fuel amid a strong economic recovery. after two years coronavirus pandemic.

The administration’s largest releases of SPR begin from this month, as it releases a total of 180 million barrels through July, or about one million barrels per day over the next 180 days. The US Weekly Petroleum Status Report showed SPR inventories stood at 550 million barrels in the week ended April 29. This was the lowest stock level in the reserve since December 2001.

While WTI itself fell from a 14-year high of $130 to less than $100 at Tuesday’s low, gasoline has stubbornly held above the $4 average, this which prompted Biden to accuse energy companies of raising prices.

“There is clearly huge concern about a recession in the markets right now as central banks continue to tighten aggressively amid a slowing economy and a cost of living crisis,” said online trading platform analyst Craig Erlam. OANDA. “There is a lot of pressure on household budgets and this will only intensify as the year progresses, which will take its toll.”

But the reluctance of the global alliance of oil exporters OPEC+ to open the taps further is keeping oil prices “very high”, Erlam noted, adding that it was “perhaps a sign that we should get used to these higher prices”.

Market participants were also on the lookout for weekly U.S. oil inventory data on Tuesday, expected after market settlement by API or the American Petroleum Institute.

The API will publish around 4:30 p.m. ET (8:30 p.m. GMT) a snapshot of the US Crude, Gasoline and Distillates closing balances for the week ended May 6. The numbers serve as a precursor to official inventory data on the same due from the US Energy Information Administration on Wednesday.

For the past week, analysts tracked by Investing.com expect the EIA to report a decline of 457,000 barrels, compared to a 1.3 million barrel increase reported in the week to April 29.

On the front, the consensus is for a draw of 1.57 million barrels which would add to the previous week’s drop of 2.23 million barrels.

With , we expect a drop of 1.31 million barrels compared to the deficit of 2.34 million the previous week.