Wed, July 24, 2024

Petroleum Price Plunges Over A Weakening Global Economy

Petroleum Products: Oil refinery industry.

On Tuesday, petroleum products prices traded lower. It was after concerns over a weakening global economy offset expectation that OPEC would be able to cut supply enough to support prices.

New York-traded West Texas Intermediate crude futures declined 45 cents, or 0.8%, to $54.48 a barrel.

Meanwhile Brent crude futures, the benchmark for petroleum products prices outside the U.S., weakened 23 cents, or 0.4%, to $58.34.

On the rise are fears of a global recession. All as the U.S. and China stand strong in their head-to-head trade conflict.

The latest monthly survey of the Bank of America Merrill Lynch presented one-third of investors expects there would be a worldwide recession in the next 12 months. It is the highest reading since 2011.

Recently, Goldman Sachs ruled out the prospect of a deal between Washington and Beijing ahead of the 2020 presidential election.

Oil traders fear a corresponding undesirable impact to overall demand on the back of signs of a waning global economy.

Last week, both the International Monetary Fund and the International Energy Agency cut forecasts for global oil demand.

Weakening demand may be getting the upper hand versus oil bulls. They hold anticipations that OPEC will respond to falling prices with more effort to reduce supply.

The head of commodity strategy at Saxo Bank, Ole Hansen, tweeted that the oil market was still “undecided”.

It has also observed long positions in both West Texas Intermediate and Brent oil have been caught in the same range for several months.

News reports cited comments of Hansen stating, “that may be surprising, given the renewed verbal intervention from oil producers increasingly frustrated to see that their medicine – production cuts – isn’t having the desired effect.”

In other energy trading, gasoline futures weaken 0.3% to $1.6604 a gallon, while heating oil plunged 0.3% to $1.8000 a gallon.

Lastly, natural gas futures traded above 0.9% to $2.123 per million British thermal unit.

Update on Gold Prices

Meanwhile, the gold rally continued on Tuesday. It is taking the precious metal to the latest in a string of more-than-six-year highs.

A senior research analyst at FXTM, Lukman Otunuga, said in a note, “There was no place like gold this morning as the geopolitical tensions encouraged investors to sprint towards safe-haven assets.”

According to FactSet, December delivery for gold on the Comex was up $10.60, or 0.7%, at $1,527.80 an ounce. All after trading as high as $1,546.10 an ounce, its highest since April 2013.

In August, gold is above 6.5% contributing to a 19.5% year-to-date rise, based on the most-active contract. September silver grew 26.9 cents, or 1.6%, to $17.34 an ounce.

After data showed the U.S. consumer-price index rose 0.3% in July, the gold gave back some ground in line with forecasts. Meanwhile the core reading, which strips out food and energy, also increased 0.3%.

Year-over year, consumer prices rises 1.8% versus a 1.6% growth in June.

In other metals trade, October platinum dropped $2.10, or 0.2%, to $861.60 an ounce, while September palladium declined $9.30, or 0.6%, to $1,421.50 an ounce.

September copper also weaken 0.8 cent, or 0.3%, to $2.577 per million British thermal units.


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