Oil and the R-word

09.12.2022 – From a 12-month perspective, the oil price has slipped into negative territory. The oil price has been hitting new lows for the year non-stop anyway. The reason: the world is probably falling into recession after all.

The experts at Citigroup, at any rate, definitely see a global recession. WTI could therefore plunge to around 65 dollars by the end of this year and even to 45 dollars by the end of 2023. This is because oil consumption in the major economies in the USA, China and Europe could fall significantly over many months. Historically, oil prices have always fallen to about the level of production costs during global recessions, the statement added. Here is the daily chart of WTI.

 

Source: Bernstein Bank GmbH

Vishnu Varathan, head of Asia Economics and Strategy at Mizuho Bank, also told Bloomberg, “Oil has been dragged lower by broader recession fears that accompany global monetary policy tightening.”

Keystone Pipeline
That leaves one actually bullish factor that has been briefly supportive in the market so far. The loss of about 600,000 barrels per day from the Keystone pipeline should actually pull the market up. At least that stopped the downtrend, judged Ed Moya, senior market analyst at Oanda Corp. We interject: you can imagine what will happen once the news comes in on the realtime news that the pipeline is pumping at full capacity again. Operator TC Energy Corp. shut down the pipeline after a leak in Nebraska.

China’s opening
Another factor that is actually bullish is China opening up and moving away from drastic Corona measures. Meanwhile, the White House left open whether or not the Strategic Petroleum Reserve will now be replenished soon. Meanwhile, the price cap on Russian oil has no immediate effect, according to oilprice.com – hopes of a bullish impact have faded. Traders had therefore begun to sell.
Congestion on the Bosphorus
In addition, the oil market is watching developments on the Bosphorus, where 19 oil tankers were recently jammed. According to oilprice.com, Turkey has changed its insurance rules, traders are confused. And so now 20 million barrels from Kazakhstan were cruising around in Turkish waters. We are curious whether the oil price turns and keep you up to date!

 

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.